This was originally published on Monday, February 13, 2017, in the Pacific Daily News. Click here to subscribe to the PDN.
How many of us look back at childhood and wish we were introduced to money and finances at an early age?
Unfortunately, many schools no longer teach the importance of saving, spending and investing money. Learning about credit and balancing a checkbook is a life skill as important to being a successful adult as reading, writing and arithmetic. Children want to learn about money and, depending on their age, there are lessons for every age group.
Ages 6 – 12
At these ages, children can start doing chores around the house to earn money. It is also a good age to start teaching them that money has a limit. Help them make choices that display the concept that once they spend the money they have, that is it, they must earn more to spend more.
- Allowance vs earning: This subject is always a difficult one for parents. Do I give my kids an allowance? But why just give it to them? Hardly anyone just sits around and earns money, so why should children be any different? The media has flooded television with programs with kids who are well off and have nothing better to do than party. But we all know that real life is far from that fantasy. Pay your kids for chores around the house such as washing dishes, vacuuming, washing the car or taking out the trash. This will instill in them that money is not just given to them but they must earn it.
- Want vs. need: Many adults have trouble with this lesson. Help your children understand the difference. Something wanted is something you desire and is not necessarily needed to survive. Need is something you have to have to survive. Teach them that their money is best spent when you purchase your needs first.
- Power of decision making: Children at these ages can start asking for some expensive items. If they want a video game and a new pair of basketball shoes but they only have enough for one or the other, they must decide which one to buy. Kids can make decisions and weigh the consequences of those decisions.
- Involve them in family finances: When going to a store, explain why you choose a less-expensive brand or why one is a better deal. Ask which they think is a better deal. Talk about deals like bulk items. Also teach them how stores can trick you into thinking you are saving, especially with deals such as “buy two and get a third for half price.” If you are going to the store for one, why spend more to get a deal on a third? While shopping, ask financial questions such as “Do we want this or do we need this?” “Can we get this from somewhere else at a better price?” Should we hold off till next week to purchase this?”
- Bank account. This is a good age range to open a savings account for them. Watching the balance grow is a great way to teach them how the bank pays interest to their customers to hold their money. Now that they are earning money, they can make regular deposits. Encourage them to put money from special occasions, such as birthdays or the holidays, into their account.
- Giving. Giving and taking care of others is just as important as saving. They can pick a charity, an organization, or even a person whom they wish to help. Maybe they can use it at a bake sale or a fundraiser. Either way, helping others is a great way to give back and it will make them feel good about themselves.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.