Stop Reading to Your Kids!

I kid!  I kid!  You certainly wouldn't stop reading to your 2-, 3- or 4-year-olds because you know they can't read themselves.  Exposure to reading is a very important part of emergent literacy and will help them learn to read.  So why don't parents introduce simple money concepts like saving money to their kids at this age?  Ok, some do.  But most don't.  Why isn't "emergent financial literacy" considered just as important?  Just because your little one won't be able to tell you what a credit default swap is (if they can, please tell me) doesn't mean that they should be deprived of the essential building blocks to building good financial literacy habits down the road.  

Don't believe me?  Read the study, "Learning Your ABCs:  The Link Between Emergent Literacy and Early Childhood Financial Literacy" by Martha H. McCormick and David Godstead.

Please pass this message on to at least one person today.  You wouldn't dream of not exposing your kids to reading simply because they can't read.  Exposing them to "value of money" concepts (sharing, saving, spending smart) early is just as important because financial literacy is essential their future well-being.  Give preschoolers the tools to start building good financial habits.  Keep the message simple.  Start with saving.  Continue with sharing and then spending smart.  Want some help?  Try the "Thrive By Five" resource to the right.  Want to make it fun for kids?  Take a look at our Money Mammals program at www.themoneymammals.com.  

Oh...and don't stop reading to your kids.

-John

Lessons for Preschoolers

Numerous parents have asked me if there are any resources on the web to help them teach their preschool kids about money. One of the best set of resources I've come across is distributed free by the Credit Union National Association, Thrive by Five. The lessons are super simple (very important for this age group) and pretty fun. Try them out and let me know what works for you.

All the lessons are in both English and Spanish. Pretty cool.

-John

All About Allowance

I have been asked by more than one parent recently about allowances, particularly for the 2-6 year-old age group to which we cater. I culled through some experts’ books and articles to come up with some pointers that are (hopefully) useful to help you get started:

When? Determine when you think your kids can handle it. I know from experience with my own three-year-old that she is too young (for an allowance, though certainly not too young to discuss and handle money). Five or six seemed to be the consensus amongst experts. Try this poll to see what 5000+ parents think, http://life.familyeducation.com/allowance/parenting/43766.html?detoured=1

Teaching Tool: Let your kids know that allowance is a tool for them to learn how to manage money, but don’t get upset when they manage it poorly. Use it as a teaching tool, not a disciplinary one.

Allowance/Chores: Strongly consider not tying allowance to chores. Though I’ve seen some reasoning to the contrary, all the sources (below) for this post suggest that chores and allowance should be separate. “In my experience, and according to many psychologists and counselors, an allowance should not be tied to personal achievement [grades]…or doing chores around the house…Give an allowance to teach your children the basics of good money management.” -Paul Lermitte from Making Allowances.

Watch yourself: If you’re concerned about how they will treat their money (and you should be), pay particular attention to your own money habits and try to be consistent with what you tell your kids and what you do.

Responsibility: Help them build personal responsibility; let them make mistakes.

Calculating the allowance is a little more difficult and a more personal decision. One prevailing thought (seen on Pearson Education’s Family Education site among others) is to give your child a weekly dollar amount that is half their age ($3/week for a six-year-old). Parent response on this particular site was vehemently against that idea because of the paltry allowance it would create. David Owen in First National Bank of Dad makes a very strong case for a substantial allowance AND providing a substantial interest rate to the children to teach the power of saving and compounding. The experts generally agreed that it’s most sensible to determine what the child will be responsible for (a list that will likely grow as your child grows) and provide them with enough for that. Whenever you start, whether it be four, five or six, keep it simple. Janet Bodnar in Dollars & Sense for Kids (aka “Dr. Tightwad”) suggests making them responsible for one thing (sweets on supermarket trips, trinkets on trips to Target, etc.) Also, give them money in denominations that allow for doling it up and saving, sharing (donating) or spending it (five ones instead of a five-dollar bill).

For more in depth information, the following books were my sources for this post:

Janet Bodnar’s Dollars & Sense for Kids
Joline Godfrey’s Raising Financially Fit Kids
Paul Lermitte’s Making Allowances
David Owen’s The First National Bank of Dad
Pearson Education Family Education Site (featuring National PTA material)