July 20, 2014
TEACHING THEM THE THIRD WAY:
Financial Savvy Starts in Childhood : Early Financial Lessons Influence How Adults Handle Money (LINDSAY GELLMAN, July 20, 2014, WSJ)
Posted by Orrin Judd at July 20, 2014 8:16 AMRegardless of whether they fully sink in at the time, having conversations about how money works early and often is the key to raising financially savvy children, financial-literacy experts say. "Money is right up there with basic hygiene" in terms of essential areas of child education, says Alexa von Tobel, founder and chief executive of financial-planning site LearnVest.com and author of "Financially Fearless."Your child's earliest money-related memories have a lasting impact on how he or she comes to handle finances as an adult, Ms. von Tobel says, so be sure to set a positive tone in money discussions, even if circumstances are less than ideal. You might use your child's request for an expensive toy as an opportunity to talk about saving for big purchases.Many parents establish a system where the child receives an age-appropriate allowance in exchange for performing certain household chores. Talk with your child about what to do with this income, says John Linfield, executive director at the Institute for Financial Literacy, a Portland, Maine-based nonprofit. Mr. Linfield suggests dividing the money (not necessarily evenly) among three jars: one for short-term spending, one for saving and one for donating. Help your child choose a charitable organization to which to donate, he says.Even if you do most of your banking online, there's value in taking a field trip to a brick-and-mortar bank branch with your child, says Ted Beck, chief executive of the National Endowment for Financial Education, a financial-literacy nonprofit in Denver. Explain to your child that this organization holds money you deposit for safekeeping, he says. And teach him or her that the ATM isn't a magical money dispenser, but rather a means for withdrawing cash from your bank account, says Ms. Godfrey.Ask about opening a savings account for your child. Some banks offer children's savings accounts that don't require large minimums. They also may offer passbooks, in which a child can track the compounding interest in his or her account.