In this turbulent financial period in our country, it's important for children to learn that money doesn't grow on trees. To help them learn a little sense about dollars, Tuesday has been designated as national Teach Children to Save Day.
Sponsored each year by the American Bankers Association, bankers go to classrooms nationwide to talk to kids about saving money. But it's not just up to bankers and teachers to work with children. Parents must also bear some of the responsibility to teach kids how to save money and teach them why it's important.
For help on how parents can get started, we asked an expert — former St. Petersburg Times personal finance reporter Helen Huntley. She retired last year after 37 years with the Times and became a financial adviser with Holifield Huntley Financial Advisers in St. Petersburg (www.holifieldhuntley.com). She is a member of the National Association of Personal Financial Advisors.
What do you think is the best age to teach your kids about money — saving and spending wisely?
When they are born. Seriously, you can talk about money in age-appropriate ways whenever opportunities present themselves, such as shopping, watching television commercials or leafing through a catalog. When children are young, the most important thing is to help them distinguish between needs and wants. Talk to them about how it's important to make sure we have enough money for things we need before we start buying things we want. Then work on getting them to understand that we can have some of the things we want, but not all of them. Instead of just saying "no" when your child asks for a toy, say "We'll put that on the wish list for your birthday" (or holiday, good report card or any other occasion you want to specify). Then when the time arrives, help the child choose from the list.
Should you make kids put all their birthday/holiday/just because money in the bank?
No. You wouldn't do that yourself, would you? Spending wisely does not mean giving up all fun. Instead we learn the importance of balancing today's needs and wants with future needs and wants. Aim to get your child saving toward an intermediate-term goal such as a bicycle, spending money for your next vacation trip or summer camp. Of course, if it's a lot of money (hundreds of dollars or more), you want most of it to go into the college fund (see recommendation below regarding 529 college savings plans). However, you also need less distant goals unless your child happens to be particularly motivated regarding college. This is also an opportunity to talk to children about helping those who have less and giving some of their money to charity. Using the money to buy something tangible (such as food for a local food bank) and delivering it to the charity in person is even better.
Should you ever tell a child we can't get that because we don't have the money or is there a better way to get that point across?
Just saying "We don't have the money" isn't enough, especially since that's often not the truth. Instead say, "We don't have enough money for everything we want, so we have to choose. If we buy x and y, we won't have enough money to buy z." When feasible, involve the child in making some of those choices.
How much should we be telling our kids about the financial disarray our country is in?
We should talk about it in age-appropriate ways. Relate the things you see around you — a friend whose parent has lost a job, a foreclosed house in your neighborhood — to the bigger economic picture. Older children can be involved in discussions about the perils of excessive debt and corporate greed. I think it's important to also explain that President Obama and his team are working on the problems in our economy and that we are hopeful for a turnaround. You should also give your children whatever reassurance you can honestly provide about your own circumstances. (For example: "I don't think I'm going to lose my job, but even if I do, I have savings that we can use until I get a new job.")
What are your five best tips to getting kids to save money rather than letting it burn a hole in their pockets?
1. Set an example for your kids. Let them see how you are saving for particular goals. Take them with you to the bank when you open an account. Talk to them about your money decisions.
2. Involve your kids in the grocery shopping — scan the weekly sales flier together, clip coupons and make a list. Show them how to compare unit prices at the store to find the best deal. Older kids can research spending on a major purchase or a family vacation trip.
3. Set up a matching plan for your kids' savings. Match what they save dollar for dollar if they agree to leave the money in the account for a certain period. Keep records and take back your contribution if the money is withdrawn early.
4. Join a credit union that has programs and educational materials for helping kids learn about money and that will allow your child to open an account. For example, see www.suncoastfcu.org/panther/.
5. Don't bail your kids out when they make money mistakes. If they blow their allowance the day they get it, don't give them more money or cover expenses that were supposed to come out of the allowance. Let them live with the consequences of their mistakes.
Do you think parents should have rules on when they let their kids spend their own money?
Yes, for a portion of significant sums such as birthday and holiday gifts. No, for allowances or smaller sums. Part of learning to make decisions about money is having real choices. Kids should be able to make mistakes and learn from them.
In the end, are our kids doomed to repeat our credit/spending habits?
No. Children learn from the good and bad examples their parents set, but they don't necessarily repeat them. In fact, it's not unusual for children in the same family to develop vastly different spending habits.
For parents who are trying to save, what's your best advice for squirreling cash away (right now we are saving for college in two different places).
• Saving for retirement should always be your top priority. No one will ever give you a scholarship for retirement.
• Pay off high-interest debt (credit cards, car loans) before saving for college.
• College savings are best held in a 529 college savings plan such as the prepaid and investment plans the state of Florida offers.
• Tailor your investments to your time horizon. As a general rule, by the time a child starts high school, college money should be out of the stock market. But in today's environment, a structured plan for pulling your money out of the market might be better. You might want to talk to a financial adviser before pulling the plug.
Sherry Robinson is editor of Go Momma at moms.tampabay.com, writes about parenting issues for the Times and the Whoa, Momma! blog. She can be reached at (727) 893-8305 or [email protected]