If you have a FICO score of 800, a cushy nest egg, and live within your means—congratulations.
However, don’t assume your children will automatically inherit your responsible money management skills.
Preaching rarely works, and indulging your kids’ every whim is a surefire recipe for disaster.
“When you look at the current financial situation, and what has happened in the U.S., it’s very clear there is some kind of gap, and we need to start teaching kids about money,” says Kristi Bruno, director of Suburban Cook County Operations at Junior Achievement of Chicago, which provides economic education for students.
If you’re not sure how to pass on sound financial values to your kids, try some of these creative (and—dare we say it—fun) solutions.
Show them the money!
Children are most likely to learn smart money habits if they have some of their own to manage. Bruno says to let your children earn money by doing chores around the house, and then open savings accounts in their names.
Libertyville High School teacher Dr. Debra Kellum has been teaching students about accounting, consumer management, economics and business for two decades. She says even very young children can begin to understand the concept of saving if you make it accessible. Encourage youngsters to fill a jar with spare change, and when it’s full, the kids can buy a special treat.
Speak their language
You may get irritated that your children are constantly wired to their iPods, but hidden within that electronic device is a life lesson waiting to happen. Kellum suggests giving teens iTunes gift cards, which gives them practice budgeting and making choices. When they know they have a finite amount to spend, kids might think twice about purchasing music don’t really love. Kellum uses that strategy with her own daughter.
“She is in charge of her iTunes portfolio, so she gets to decide how she spends her money,” Kellum says.
Investing – minus the risk
Adam Bergman is a teacher at Highland Park’s Elm Place Middle School, where he runs the school’s stock club. Bergman says students can grasp the fundamentals of investing, even at a young age. If you’re not willing to let your seventh grader take a gamble with your portfolio, have no fear: There are plenty of websites that let you create virtual investment accounts. Set up accounts for your kids on vse.marketwatch.com/game/homepage.aspx, and let them try their hands at picking and trading stocks. They’ll learn firsthand the rush that comes with big gains, and how risky choices can lead to serious losses.