Tips for Talking with Your Kids about Money

(ARA) - When high schoolers are asked where they've learned about managing money, overwhelming numbers of them say "at home." How good are the lessons at your house? To help kids learn to handle money, parents have to set a good example -- and make use of teachable moments to explain their behavior. From paying bills to using credit cards -- days are filled with opportunities for parents to launch conversations about using money.

"When it comes to helping their kids learn about making good money decisions, parents have much more influence than they realize," according to Meridee Maynard, senior vice president of life products for Northwestern Mutual. "And it's really never too early to get started -- even today's preschoolers know what money is. Plus, there are lots of lessons to be learned about money and its uses before kids get to the impressionable teenage years."

In 2006, teens spent $195 billion. While teens have proven they can spend, their understanding of money is severely limited. Every other year, Jump$tart Coalition for Personal Financial Literacy tests the nation's 12th graders on the basics of personal finance. In test after test, students have averaged a failing grade.

The Jump$tart scores are just another sign that parents have to talk to kids about managing money. The lessons should start early and build on each other. Says Maynard, "Even the most mundane activities can provide an opportunity for short, but meaningful, money lessons. Kids can help with the grocery shopping, so they can get an idea of what their favorite items cost. A trip down the snack aisle can spark a lesson about brand-name versus generic prices."

To get additional practical -- and fun -- ideas, check out Northwestern Mutual's newly redesigned Web site for teaching kids about money, www.themint.org. The site helps families begin and continue the money conversation. There are lots of interactive pages, along with a parents' section to help create teachable moments. Here are just a few highlights:

A 401 (kids) program.
Parents can pledge to "match" any money a child saves. Every two weeks, parent and child can sit down and count the savings to see that money grows and that saving can be fun.

Four banks, not one.
Here's an idea more effective than a single-slotted piggy bank. With four banks, kids can separate their money by goals: a bank for spending, saving, investing, and donating. It's as easy as finding four plastic jars and labeling them. Younger kids can decorate the jars with pictures to keep the goal of each bank in mind.

Shopping smart together.
When kids are young, parents should try to show youngsters ways to stretch their dollars: choosing alternatives to designer brands, buying on sale but not on impulse, judging quality, recognizing gimmicks, and making good decisions.

Modeling restraint.
Parents who don't head to the mall for every big sale teach the difference between needs and wants. Parents who explain why they cannot buy that new flat-screen television introduce the topic of thoughtful spending. Then the lesson can be taken to the next level: unplanned or impulse purchases undermine the family budget.

Money "show- and-tell."
Bill paying time is a great time to talk about the cost of living. Here's how. A parent chooses a group of bills to be paid. Using cash or play money, the parent stacks singles, fives, tens, and twenties on the kitchen table to pay the bills. As each bill is paid, the parent removes money from the stacks and keeps a running total. It's a great exercise that makes the point visually and dramatically.

Lessons in money management don't need to be complex. By keeping it simple, kids can reap the rewards of being money smart -- something that will pay dividends for years to come.

Courtesy of ARAcontent