Constructive Ways to Talk About the Economy With Your Kids

As the weak economy continues, chances are good that you or someone your family knows will be affected. Naturally, you want to be able to able to answer any questions your child may have without adding to their worries. Try these suggestions for talking about the economy with your children.

General Guidelines for Talking About the Economy With Your Kids

1. Put materialism into perspective. Studies show that happiness is more about experiences than possessions. Your kids will be better off if they seek support from relationships and spiritual traditions rather than relying on shopping to make them feel good.

2. Encourage saving. Tight family budgets are also good for teaching the importance of saving. Show them how you maintain a rainy day fund and save in advance for vacations.

3. Explain wants and needs. When your kids notice family cutbacks, you have a great opportunity to distinguish between essential and discretionary spending. Explain that mortgage payments come first, but they can vote on whether to buy brand name breakfast cereal or use the grocery savings to purchase a new video game.

4. Be consistent. Set a good example by keeping the household budget on track. Kids get bombarded with ads so you give them a valuable lesson by showing how to resist sales pressure.

5. Maintain an ongoing dialogue. Just like sex, money matters are more than a single conversation. Family meetings are one great way to structure a regular time for such important issues.

6. Give back to your community. Reaching out to others is a sure way to welcome more abundance into your own life. Find volunteer projects for the whole family through your church or neighborhood associations. They will help your whole family feel more grateful even during hard times.

Suggestions for Younger Children

1. Remain upbeat. Small children are very sensitive to their parent’s moods. Take care of yourself and try to remain cheerful. If you’re showing signs of fatigue and worry, give your kids a straightforward but brief explanation to help prevent them from blaming themselves.

2. Let them ask the questions. Federal bank policy is complicated. For most kids under 10, it’s okay to use their questions as guidelines for what’s on their minds. Also, stick to simple language they can understand.

3. Encourage teamwork. Kids enjoy being part of the solution. Assign them tasks during grocery shopping. Brainstorm together about finding free and cheap goodies like movies from the library and using leftover gift wrap to cover school books.

4. Talk with your child’s teacher. Teachers often have excellent insights about how children are feeling about current events. Seek out their advice.

5. Watch for potential signs of distress. Consult your pediatrician if you see changes in your child’s sleeping and eating habits. Life events like divorce can compound the impact of financial setbacks.

Suggestions for Tweens and Teens

1. Discuss the news together. Watch good quality news programming together as a family. You’ll stimulate informed discussion of trends relevant to your own household.

2. Research topics of interest. Knowledge is empowering. Assist your children with using online sources or your local library to learn more about the job market or other subjects.

3. Nurture your child’s inner entrepreneur. Teaching your child how to earn money is an even better gift than sending them to some tropical locale for spring break. Working part-time jobs or finding ways to make money from their hobbies can build their confidence and college savings.

Keep any discussion about finances simple and age appropriate. By projecting a positive attitude, you’ll help your child to feel reassured and better equipped to manage the inevitable ups and downs of the economic cycle.

Teach Your Kids About Money With an Allowance

Taking the time to learn wise financial strategies and putting them into practice has a great impact on your children.

Research shows that the substantial majority of kids are destined for a financial future that is remarkably similar to that of their parents. So what you teach them about money is likely to stay with them for the rest of their lives!

You can take advantage of this tendency to prepare your children for a great financial future. Besides managing your own money well so they mimic positive financial choices, you can also teach your kids the practices of frugality, budgeting, saving over time, and much more with effective use of an allowance.

Starting an Allowance

Try to recognize when your child is ready for an allowance. If you begin too soon, your child won’t comprehend the value of the money he receives. Typically, a good starting time is when the child is old enough to understand how the allowance system will work.

Allowance Systems

There are three types of allowance systems from which to choose:

1. Gift System. The gift system is simply a weekly payment to the child. The money isn’t given based upon any work/chores the child does or fails to do. The child gets the money just for being part of your family.

* The advantages of this method are that it is consistent and unchanging. There are no decisions that need to be made.

* There are many disadvantages:

  • The child is less likely to truly appreciate it.
  • He doesn’t gain a sense of achievement.
  • The child is also unlikely to develop financial responsibility when the money is just given to him and he’s done nothing to earn it.

2. Reward System. The reward system is the most widespread system parents utilize. Parents establish a list of chores for the kids to perform on a weekly basis and then pay an established amount for the successful completion of the chores.

* The advantages of this system are that there are penalties for not doing the assigned chores and rewards for doing them. So this system has both reward and punishment built into it.

* The disadvantages are somewhat difficult to see when the kids are younger, but the reward system sometimes results in a child that only wants to do something if it’s part of the established list.

3. Income System. The last system, the income system, is similar to real life. When there is a task to do that is not typically expected of your child, he gets paid to do it. Basically, you want to create an allowance that is paid to your child for work beyond the normal responsibilities.

* This allowance will vary, but it seems to have more positive impact than the other two systems. So you could have a simple chore list that the child must complete without financial compensation, then any other work beyond that list would result in receiving the allowance.

If you’re serious about providing your children some financial knowledge, an allowance can be a meaningful part of that education.

If you also have regular discussions about money with your children in conjunction with an allowance, you’re really giving them a great head start. Don’t just hope for the best; give them the best chance possible for a bright financial future.

How to Teach Your Teens About Credit Cards

As the world becomes more complicated, you have the responsibility to guide your children the best you can. One of the most trying subjects to teach your kids about is how to appropriately manage money.

More specifically, teenagers develop great interests in the almighty credit card. Credit cards are not to be taken lightly at any age, but especially during adolescence. How can you educate your teens about the use of credit cards?

Strategies To Help Learning To Use Credits Cards Responsibly

1. Ask where the money will come from. Insist your teens know specifically where they’ll get the money to pay off the credit card charge before they charge anything.

2. Encourage responsibility. Explain that your teens are responsible for paying their credit card bill on time. In addition, require them to pay off their credit card balance within 30 days. Discuss how interest charges and other fees work and that paying such fees is like giving away their money for nothing.

* Take care to listen to how your teen takes part in this discussion. If you determine your teen requires more maturity or understanding of the information, avoid giving them a credit card and explain briefly how you arrived at your decision.

3. Consider starting with a limited balance credit card. Have your teenager save money until a certain amount accumulates, like $100.00. Then, accompany them to your banking institution or a store to obtain a pre-paid card for the $100.00.

* Even though your teen paid for the card with their own money, it’s a good idea to tell them to make every effort to stretch out their use of the card. A benefit of this method is that your child saved the money upfront before actually charging items.

* They can, therefore, understand that the credit card balance is tangibly their own hard-earned money. The downside of this method is it may not teach your child the responsibility of charging only what they can pay off within the next month.

4. Provide a credit card to replace weekly allowance. Consider converting their allowance to a monthly credit card balance. This method allows them to learn about credit card management. Consider this example:

* You normally pay your teen $30 cash weekly allowance. When they turn 16, state you’ll now provide a credit card rather than the $30 cash weekly. Explain that they can charge up to $120 per month (4 weeks times $30 equals $120) as you’ll pay up to that amount monthly to cover their credit card purchases.

* Stress that if they charge over $120, they must come up with the difference to pay off any balance over the $120 when the statement arrives.

* If they charge over $120 for the month and are unable to come up with the difference, they must surrender the credit card until they pay you the difference owed (even though you’ll go ahead and pay it off to avoid monthly fees).

* Using this method to teach your teen how to handle credit cards is a helpful lesson in managing their money with limited funds. Your teen learns to limit spending to stay within their means.

Teaching teens how to handle credit cards is challenging. The good news is that if you start early with your kids about how to earn, save and spend money, they’ll easily progress to understanding the above concepts with your help and guidance.

Praise your teens’ efforts when they manage their finances and credit card issues well. You’ll build their confidence for the future when you teach them how to handle credit cards wisely.

Teaching Children To Be Careful With Credit Cards

When children start to drive or go off to college, a credit card often seems like a logical addition to their repertoire. Credit cards are useful things to have for emergencies, after all – in the event that the car breaks down by the side of the road and the side of the road happens to be in the middle of nowhere, a cell phone and a credit card can get your child out of the worst of situations quite easily.

However, when students open up their first cards, generally their minds are focused on one syllable, and one syllable only: spend. The problem with credit cards is that due to the fact that there is not visual passage of money from the customer to the institution, many students forget that plastic is actually money. It’s not uncommon for some college students to end up cutting back on classes in order to fit in a job to cover credit card payments. A large number of students get into serious trouble with credit cards, mostly due to a lack of forethought regarding the subject.

This can all be avoided by taking the time to teach your children about credit cards and the proper use of plastic earlier in life. Yes, it might seem like overkill to try and introduce a five year old to the idea of APR and interest, but there are ways that you can start instructing your children in the use of credit cards years before they come into play.

A great way to do this is to involve your children when using credit cards at a restaurant. Explain to your children what it means to use a credit card, and where the money comes from when the plastic gets swiped. Many children might have a hard time with the concept, so it’s likely something that you’ll have to explain many times before your kids get it in its entirety. But that’s okay – even if little Jimmy doesn’t understand the ins and outs of interest after the first day seeing an American Express card, it doesn’t mean that he won’t eventually understand through repetition.

Restaurants are especially great places to bring up credit card usage because of the tip calculation. Let your children in on the calculation of the tip – tell them the difference between giving a waiter ten percent or twenty, and then invite them to help calculate it with you. You’d be surprised how much of an incentive getting to write on the receipt can be – most kids go crazy for the chance to “be like Mom and Dad” and write in the tip amount on the slip of paper.

So, the next time you’re at the restaurant, bring up the credit card to your kids. This can save you a lot of problems once they go off to college and have plastic of their own!