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Marc A. Hebert's Money Sense: Preparing your children for the financial world

August 25. 2018 11:26PM

While financial literacy and money management may not have been vital skills taught to the children of generations past, they are undoubtedly necessary to the children of today. But just how well are these skills being taught?

According to an online exam conducted in 2012-2013 by the National Financial Educators Council, the average score was just 58 percent among a sampling of 1,309 young people aged 15 to 18.

These scores suggest that children are not being taught the skills needed to cope with today's financial life. To help, we offer these suggestions designed to prepare your children to deal with the realities of money:

. Start with yourself: Parents impart critical money lessons. It is a good time to examine your own values and habits towards money to see what money lessons you are teaching. Children learn by observing others, so set a good example and remember to communicate with your children.

.Start early: Young children can learn about saving and spending habits. At age 5, it might be time for a piggybank. At age 9, a savings account, and maybe by age 12, a clothing allowance. These are just suggestions for the learning opportunities present at different ages. Remember that young children learn by repetition, so some lessons will need to be taught multiple times.

. Use an allowance: The manner and use of allowance money is controversial and depends on the parent's feelings. Some parents feel an allowance should be contingent on doing household chores. Other parents feel that these chores are family obligations and that children should not get paid for completing such responsibilities.

Whatever the parent chooses to do, an allowance is designed to shift some spending decisions from the parent to the child, reduce the need for the child to ask for money, and to provide the child a mechanism for learning how to accumulate and spend money.

. Encourage savings and giving to charity: Children need to learn the initiative and discipline to save their own money. For example, they can be encouraged to save for a special purchase they desire.

Children can also observe your own charitable activity and learn the functions charities serve. Children can experience the joy of giving to causes they value.

. Encourage them to earn extra money: Teenagers can work part time. Younger children may do household chores for a fee.

. Discuss household finances: Often, financial topics are taboo discussions at family meetings. We suggest it is valuable to involve children in these money talks. They can see how much money is needed to run a household. For example, going to the grocery store is often a first spending experience. They can learn how to shop and compare prices.

Stores in general are often valuable training grounds. Train children how to plan purchases. They can learn how to check goods for value, quality, warranty, repairability, and to evaluate price.

. Let them make mistakes: Like other areas in life, mistakes teach. If a child buys a cheap toy that breaks in minutes, then the child receives a purchasing lesson. Mistakes teach children a common sense approach towards spending. They also learn about actions and consequences.

. Educate: Educational money management tools are readily available. There are books, videos, computer games, and school courses. Institutions, such as credit unions, may offer money management programs.

. Watch what you say: Don't lie. Telling a child you don't have the money for toys won't fool them. Telling them you don't spend money just because you have it and that you are choosing to spend it on well thought-out purchases later is honest.

Money decisions directly impact quality of life. By teaching children at an early age how to manage money, parents are empowering them financially for a lifetime.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at Your question and his response might appear in a future column.


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