Six tips for raising money-smart kids:
Remember that experience is better than lecturing. When your kids are ready to learn about money, let them make some financial decisions. It might be as basic as choosing between an ice cream treat and a soda. That might not seem like a financial decision, but it teaches the concept of relative value because the ice cream and the soda cost about the same. They can learn about the power of making a choice, even if they can't get everything they might want.
Start young. Many kids in preschool can make the ice cream vs. soda decision. Elementary school kids are ready for an allowance that lets them buy some things that you used to buy for them. Late middle school kids can start managing a budget to buy their own clothes. If a subject like money is introduced gently into day-to-day conversations and activities, it's less daunting.
Establish boundaries. Let them know what they are not allowed to buy. That might be clothes displaying profanity, dangerous objects like knives or violent video games.
Let kids be themselves. They might spend money on things you would never want, but it's what they want, and that lets them start developing their own money personality and skills. That individuality may mean a shirt that you think is ugly or music that sounds like broken instruments.
Induce, but don't dictate. Many parents use the method of giving allowance with the parameter that a third goes to saving, a third goes to charity and a third is left for spending. While each family needs to do what works for them, I'd suggest this isn't giving the kids true financial decision lessons - it just teaches them to divide into thirds. If you want to have your child save, agree to match part of what he saves and doesn't touch for six months. That's teaching through experience.
Don't bail them out of bad decisions. If kids make poor choices, express your compassion for the error, ask how they might handle the situation differently in the future and let them deal with the outcome. We all learn from our mistakes.
Linda Leitz is a Certified Financial Planner and the author of 'The Ultimate Parenting Map to Money Smart Kids, ' available at www.brightleitz.com. Questions for this column can be sent to firstname.lastname@example.org.