In the wake of the economic recession, parents are talking about money with their children more often and earlier in life, according to a recent survey.
And yet most parents -- 62 percent -- say they are still looking for ways to convey the importance of money management to their kids, according to The National Money Night Talk Survey, developed by American Express and personal finance guru Jean Chatzky and endorsed by the Council for Economic Education.
So here are some tips from experts and resources for parents:
BE A ROLE MODEL: "If your children see you buying whatever you want, and worrying and arguing about money and not talking about saving for the future, it's not hard to predict what kind of financial behavior they will exhibit," said Jim Roberts, a professor of marketing at Baylor University who studies compulsive buying and credit card abuse.
Involve children, in an age-appropriate way, in family discussions about spending, such as the cost of vacation destinations and a new car purchase, as well as routine money chores, such as balancing a checkbook or clipping coupons, said Jan Brakefield, a professor of consumer sciences at the University of Alabama, who teaches money seminars called Cash Camp to middle-schoolers.
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PRACTICE: If you want your child to be skilled at putting a basketball through a hoop, you give them a basketball and encourage them to shoot repeatedly. Similarly, if you want them to be skilled at managing money, you must give them money and encourage them not only to save it but spend it too. Allow them to make spending mistakes they regret, and occasionally let them to run out of money. Require them to choose among similar purchases with different features and prices. Of course, parents retain veto power over inappropriate purchases.
ALLOWANCE: An allowance system can be the centerpiece of money lessons for kids. It governs how money gets into their hands and how it leaves. Rules should be consistent, and payments should be regular.
Children are ready for allowance as soon as they understand that money can get them items they desire, said Melanie Javier, executive director of Kids Wealth International Club, which runs youth financial literacy day camps in Illinois.
Parents should customize amounts for how much their kids can handle, what they can afford, and what parents expect kids to buy with the money, Brakefield said. Do they only buy discretionary items, such as video games and a baseball cap, or will they have to buy school lunches and back-to-school clothes with the money too? Rules of thumb include giving weekly allowance in dollars equal to half a child's age: A 10-year-old gets $5. Or try a buck per grade in school: A seventh-grader gets $7.
Parents often get hung up on whether to link allowance to chores. Some experts say no, that managing money is a different lesson than earning it. While fostering a work ethic and entrepreneurial spirit is important, some parents think children should do chores to be contributing members of the household, not for pay.
"I'm not big on allowance as payment for doing chores," Brakefield said. "If you're joining this group as a family member, you're pledging to do these things."
Others say linking allowance to chores is fine. A compromise is an optional-chores system, where children are given an allowance unlinked to regular chores to manage, but they can earn extra money by doing extra chores they're not usually expected to do, such as washing the car or cleaning the garage.
TEACH LESSONS: Some fundamental lessons should be part of any allowance system, experts say. Kids should be able to evaluate the difference between spending needs and wants. They should also have to make trade-offs, meaning if they spend money on x, they won't be able to spend money on y. Children also need to learn how to delay gratification, or resist spending temptations, because they have bigger goals for the money, Brakefield said. And at some point, you should talk about how to deal with all the marketing messages bombarding your child.
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JARS: Successful allowance systems often allocate money to jars (envelopes, etc.), typically labeled spend, save and give jars. It's a simple way for children to budget for current expenses, long-term goals and charitable donations.
Javier adds a college savings jar and a financial freedom jar, containing money to be invested so one day the child will not be reliant on job earnings. She also divides the spending jar into "living" (needs) and "play" (wants).
DIGITAL TOOLS: Much of your child's money life will exist online in the future. ThreeJars (threejars.com, $30 per year) is a simple but feature-rich online accounting system for allowances. The digital currency is IOUs that represent actual money controlled by parents. Allowance IOUs are credited to a child's account weekly and dispersed into the usual three jars.
Free site Digibeanz (digibeanz.com) helps parents "pay" students for doing chores, earning good grades and reading books. You assign children tasks to earn a number of Digibeanz. When completed, they go online and select items they want to cash in their beans for (each is worth 10 cents). The items are sold through Amazon.com, where parents buy the product.
Disney teamed with financial firm T. Rowe Price to create a free online companion to a financial-education exhibit at Walt Disney World's Epcot theme park. The Great Piggy Bank Adventure (thegreatpiggybankadventure.com) incorporates money lessons into an online game. Among the topics are goal-setting, saving, spending, inflation, asset allocation and diversification.
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TEACHING RESOURCES:
Here are additional free resources for kids and parents:
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--The National Money Talk Night at moneynighttalk.com encourages parents to take a pledge to talk with kids about money on Sept. 16. The site provides talking points to get started. "How to Raise a MoneySmart Child: A Parent's Guide," at jumpstart.org.
--Junior Achievement, ja.org.
--Feed The Pig by the American Institute of Certified Public Accountants and the Ad Council: tweens.feedthepig.org.
--Handsonbanking.org by Wells Fargo Bank.
--History in Your Pocket's Pocket Change site sponsored by the U.S. mint: usmint.gov/kids.
--Wow!Zone by TD Bank, tdbank.com/wowzone.
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ONE MARSHMALLOW OR TWO?
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A 4-year-old child is in a room with a marshmallow. She is told she will be left alone, and she can eat the treat right away. Or, if she waits until the adult researcher returns to the room, she can have two marshmallows.
This was the essence of an experiment by Stanford University psychology professor Walter Mischel in the late 1960s.
It had profound implications when he took the experiment further and tracked down those same 4-year-olds later in life.
Children in the experiment who were able to delay gratification and wait until the researcher returned to claim two marshmallows grew up to have fewer behavioral problems, higher scores on college entrance exams, better attention spans and superior social relationships.
In short, they achieved more life success as adults.
