Ultimate Business Guide
Dollars and Sense
By Megan Malugani
Educating your kids about money and savings ideally begins long beforeyour tween asks "Mom, can you buy me an iPhone?" But when do you start discussing money with your children? And what's the best way to encourage your kids to be smart rather than frivolous with their dollars and cents?
Financial advisor Colin Aldis, group partner in the Rochester group of Thrivent Financial for Lutherans (5721 Bandel Road NW, 289-1682), offers tips on how to establish responsible spending (and saving) habits in your kids:
1. Start discussing money at a young age. Kids begin to understand the concept of money as young as 2 or 3 years old. "Kids have a fundamental understanding of what an ice cream cone or a stick of gum costs," Aldis says. When your kids are pre-schoolers, "use simple examples in your regular daily routine," like your purchases at the coffee shop, grocery store,
or gas station, to demonstrate how money is used and how much different items cost. At this age, money can be a tool to help kids learn math ("How many quarters make a dollar?"), and there is no need for values-laden conversations about good and bad ways to spend money. "Keep it age appropriate," Aldis advises, and don't offer too much information. Your child doesn't need to know (nor would he or she understand) the size of your mortgage, for example.
2. Add savings to the equation. Encouraging children to save money is where things get a little more complicated. "It's easy to talk about spending because kids see it at a very early age—going to a Taylor Swift concert, a Twins game, or a Honkers game. They see spend, spend, spend," Aldis says. "Saving is more challenging and parents need to help kids form some structured savings habits." At workshops and when kids open bank accounts, Thrivent Financial gives away piggy banks divided into three segments: save, spend, and share (with people in need, charitable organizations, or the child's church). Even without a tri-sectioned piggy bank, you can encourage your grade schoolers to divvy up their money this way. A young kid may not be patient enough to save for a long-term purchase, but she can probably hold out to buy a t-shirt at the concert she's attending in two weeks.
3. Encourage budgeting and consider an allowance. As your kids grow into tweens, they'll notice that other kids their age have big ticket items like iPods, iPhones, and designer jeans. Now's the time to introduce the idea of budgeting. "Parents need to say 'We have a limited budget for how much we can spend and allocate for different things, and that means we have a limited budget for the items you want," Aldis says. "Say, 'Hey, you want a pair of jeans that costs $70, but we are only going to pay $50. You have to find a way to pay for the extra $20.'" Tweens who can’t make money babysitting or lawn mowing may need an allowance. An allowance shouldn’t be used to “pay” kids for routine chores that are expected of them,
like keeping their room clean or helping with the dishes. However, an allowance can be payment for helping with additional weekly or monthly chores that go beyond the norm, Aldis recommends. But if that’s the case, parents must consistently withhold the allowance if their child doesn’t earn
it by doing his or her required work (no matter how much they beg!). If adults don’t do their work, they don’t get paid, right? The same should be true for your child, and the earlier they learn that lesson, the better. Thrivent Financial for Lutherans is offering a “Parents, Kids, & Money Matters” workshop at Rochester Central Lutheran School at 9:30 a.m. on Saturday,
October 2. The workshop is free and open to the public. Call 289-1682 or email rochester@thrivent.com for more information. You can also find the workshop materials at www.thrivent.com/moneymatters.