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It’s time to talk to your kids about money

Posted: November 6, 2008 7:22 p.m.
Updated: November 7, 2008 4:30 a.m.
 

Communicating with teenagers is hard enough for most parents, and talking about money is no exception. In fact, research shows that only 36 percent of adults are teaching their children how to become financially responsible. In general, parents are uncomfortable speaking with their children about finances because a lot of people hold the widespread view that personal finances is a taboo topic.

But instilling good savings habits and teaching your children about money can help ensure they develop good skills later in life. Learning money management is a fundamental needed skill in today's complex society. Obtaining this skill can give your children increased confidence and self-esteem. The added benefit of this education comes back to the parents as well.

Start early
The key is to discuss and teach children about finances when they are younger. Personal finance is seldom taught in school, so financial education generally falls on the parents. Here are some suggestions to make that a good education.

In a younger child, talk about money as the topic arises. Start the education process early by teaching your children the concepts of earning, spending, saving, goal setting, borrowing, and sharing. Obtain financial education materials from your work place, educational organizations or financial institutions and share them with your kids.

As they grow older, allowances provide a good avenue for helping them learn to save, spend and give to charity. Use envelopes or jars where they can divide their money into categories. Explain shopping decisions you make. Let them make their own small financial mistakes, such as wasting allowance money on a poor purchase.

Get it Now!
Unfortunately, what children see on television works against us. If we keep silent about money, then the advertisers will be the educators. Our children will learn want versus need. As children grow up, include them in day-to-day household finances. Participating in discussions, and perhaps, even being consulted about major financial decisions, especially those that affect the entire family such as the purchase of a new home or car, or a family vacation can strengthen their skill. Definitely include them in discussions that have a direct impact on them such as clothes or college. Inform them about financial sacrifices that might have to be made if a parent is laid off. Sharing these problems openly and working on them together as a family will help your children learn that the things that make us happiest are our relationships, not our money.

Set a good example through your own management of money, especially judicious use of credit cards and money management. Reviewing the monthly statements along with a discussion of good credit is also valuable. Teach them the financial facts of life. When they start earning money, open an individual retirement account for them and explain why they need to set aside money for retirement. Financial literacy is an ongoing education.

If all else fails, a professional financial advisor also can help. As an outside, neutral adult, the advisor can provide financial education directly to the child.

Julie M. Sturgeon is a certified public accountant in Valencia, specializing in individual and business tax issues. "It's Your Money" typically appears Thursdays and rotates between a handful of the valley's financial professionals. Her column represents her own views, not necessarily those of The Signal.

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