Financial Literacy and Finances for Children and Teens | blog.firstffcu.com

For many families, using an allowance to encourage children to do chores is an effective means of both teaching responsibility and money management. For other families, linking chores to an allowance means that the children only learn to help out around the house in exchange for payment. It is important for parents to sit down and talk about what they hope their children learn from the experience of getting an allowance. Here are three common methods you may wish to consider implementing:

The “You’re Part of the Family” Strategy

This strategy hinges on a few things: adult family members must always set a good example when it comes to their own chores, and the chores given to a child must bring them closer to the whole family. Family work days are effective ways of making this strategy work. The downfall of this strategy is that it can often be harder to track what, when and how well a child completes their given tasks.

The “Must Work for Your Pay” Technique

This technique links each separate job with an amount of pay. The benefit of this style is that it can make keeping track of completed tasks much easier. To make this work, very clear expectations must be set both with a timetable and in regards to how to correctly carry out each task. The downside is that since the children link a task to a certain amount of money, they may decide the amount is not worth the work required to complete the task. This can cause friction and frustration with parents and children.

The “Request as Needed” Method

This method involves you allowing your child to make requests to you for the things they want, which can allow you to help your child verbalize why what he or she wants, is important to them. It also builds their ability to negotiate and be persuasive. The downside of this method, however, is that you will constantly be having your child ask for and negotiate for what he or she wants.

Whatever method you use, there are some universal tips for every allowance strategy:

Help your child learn to give and save by encouraging them to put 1/3 in a savings jar, 1/3 in a giving jar where they choose where that money will go every so often, and 1/3 in a spending jar that they can use whenever they want.
Begin early. Most experts suggest beginning to help children work with their own money around the time they enter Kindergarten.
You will need to clearly define that allowance money goes to what your child wants and not what they need.
Raises should be given at birthdays and can also be linked to an increase in responsibilities.
Keep good track of responsibilities completed so that confusion and arguments do not occur over the job being completed.
As a child grows, it is OK to give extra money for larger jobs completed, like bigger seasonal work around the house.

Learning to work with money is an important childhood milestone. Giving an allowance can be a positive event that brings the family together instead of creating arguments.

ATTENTION PARENTS: Please bring your children in to take full advantage of our First Step Kid’s Savings Account* – a unique product that was specifically designed for young people, with a focus on education and fun and it’s a great way to encourage your kids to save every penny! We also offer our Dollar’s for A’s Program** and our annual Summer Reading Contest which additional ways your children can earn money while having fun doing it – for more information, visit our website.

This article written by our friend, Marcia Hall of GoNannies.com.

*A $5 deposit in a base savings account is required for credit union membership prior to opening any account. Parent or guardian must bring both the child’s birth certificate and social security card when opening a First Step Kids Account at any branch location. Parent or guardian will be a joint owner and must also bring their identification. A First Financial membership available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties.

**Available for First Financial members between 1st and 12th grades. Child must be present and a deposit to a First Step Kids Account is required to receive the Dollars for A’s incentive. Offer applies only to report cards for most recent school terms. Qualifying report cards must be submitted within 45 days from the date of issue. No back rewards available for prior semesters or marking periods. Letter grade “A” (or school district’s equivalent) or 90%+. Limit of $10 will be rewarded for A’s per each marking period, not to exceed $40 in Dollars for A’s deposited per school year or calendar year.

Human beings may be destined to do everything the hard way. Consider teaching kids about money – parents can do this quite simply, following a few guidelines. Parents are hands-down the most influential force in any child’s life, and studies show that this extends to money management. Yet, the money talk still doesn’t happen in many U.S. households.

Meanwhile, we have a global movement to bring financial education into the classroom. Too many kids go to college or get their first job without a basic understanding of budgets, debt, and saving.

Jonathan Clements is one parent who has made a big effort at raising financially literate children. A former personal finance columnist at the Wall Street Journal, Clements is now the director of financial education at Citi Personal Wealth Management. He started family money lessons at age 5 with his children, who are now twenty-somethings with enviable money management skills.

Clements believes there are four simple guidelines to raising money-smart kids:

Make them feel like the money they spend is theirs. One way to do this is pay an allowance, explain what the money is for and never give in when they ask for more. “The first rule of parenting,” Clements says, “is to never negotiate.” With young children, play the soda game. When you eat out, offer $1 if they drink water instead of a soft drink. It’s shocking how often they take the $1. Pay allowance to a bank account so that they must make a withdrawal before they can spend.
Tell family stories that illustrate money values. Clements’ own grandfather inherited and squandered a small fortune. He says he grew up hearing the story over and over from his parents; it ingrained in him and his siblings the lesson that money spent is not easily replaced. Share stories about your humble roots or how you struggled when starting your career. That way your kids will understand they must work to earn their lifestyle.
Lead by example. Even if you are not a financial whiz (and who is?), you can set a good example by paying your bills on time and staying out of debt troubles. “If your kids know you’re up to your eyeballs in credit-card debt, they aren’t going to pay much attention to any wise words you might have about managing money,” Clements says. “Your kids are more likely to do as you do, not as you say.”
Manage expectations. In their teens, Clements’ kids clearly heard what Dad would and would not pay for as the kids reached adulthood—how much he would pay toward college, what kind of support they could expect after college, and how much he would pay toward a wedding. This gave them a realistic sense of what was coming and there were “no bruised feelings” later.

And there you have it. The hardest part may be consistency with your message and, for some, staying out of money trouble themselves. That’s all the more reason to commit to a plan like this, which will benefit you too!

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