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Making sense out of dollars and cents

Posted: August 4, 2008 7:31 p.m.
Updated: October 6, 2008 5:01 a.m.

Balancing the checkbook, managing a budget and writing checks may seem like "adult stuff," but those everyday tasks can become lessons for kids as they begin to understand money and finances.

Phil Schramm, a certified financial planner in Valencia, sees the upcoming school years as an example of how parents can give their youngsters power over their spending.

"Give them a budget to deal with and then go with them and let them buy the things they want," said Schramm, who is a merit badge counselor for the Boys Scouts of America, which offers lessons in financing.
"They'll get an idea of how far the money goes."

Budgeting also works for a child's regular allowance as kids can get a firsthand look at what their money is going towards.

Schramm said another option is for parents to take their kids grocery shopping with them to understand the cost of food.

Arif Halaby, president and CEO of Total Financial Solutions in Newhall, believes parents should avoid giving their children allowance for basic household chores.

Rather, Halaby, founder of Total Money School, encourages families to sit down and identify the roles that every member of the family holds, whether it's dad's role as going to work or mom's duties at home.

For the kids, anything else that goes beyond their regular chores should be treated like "overtime," he said.

"It teaches kids that they are not pets and they are to contribute to the family," he said. "And that mom and dad don't wait on them hand and foot."

Plus, Halaby said kids learn to respect the family unit while understanding that value isn't necessarily measured by money.

Saving money is also a key aspect of money management.

"It's important for them to learn how to start saving," Schramm said, and added that knowing the difference between long-term saving and short-term also matters.

Trish Lester, a certified coach for the kid-friendly Camp Millionaire school, believes that for parents, "one of the most important things is to introduce their children into whole process of bill paying" as a way to get past their "mystery."

"If a parent is sitting down to pay the bills, invite the kid to come over and write a check," she said.
Giving kids a budget to work with is also a strong tool for parents to use.

Lester said kids will truly learn about money once they spend - and ultimately run out of - their own funds.

Before that can happen, Lester invites parents to sit down with their children and build a budget for all their necessities, ranging from clothing to entertainment.

That conversation can include ways to save money for bigger purchases, like iPods and even cars, she said.

Parents can also look out for programs in schools that give kids a way to understand money, whether it's a local bank giving a presentation or the PTA starting a financing program within the classroom.

As for the proper age to introduce kids to money, it truly depends on the child's maturity level.

To Schramm, teaching from a fairly young age, possibly around age 6, is a good start for parents who want to offer allowance.

By age 10, kids can begin to understand how to budget money.

Halaby believes the lessons can start as early as two years old.

"It depends on how aware your kids are," he said, but added that sooner is always better.

"Society is so quick to bombard our children with its advertising images of things they need," Halaby said.

"Keeping up with the Jones is now becoming keeping up with Johnny."

Halaby, who credits the book "Rich Dad, Poor Dad" for inspiration, believes there's a lesson in teaching kids that there is worth in aspects that don't involve money.

"There's value in things, such as volunteering and donating time," he said.

Whether it's showing kids how to write a check or giving them a back-to-school budget, the goal is for kids to build strong money skills early on that will increase their financial success during their adult years.

Lester calls it creating a "lifetime of good habits.

"Even if you throw a nickel in a jar as a child, it becomes a habit that you're saving money."

Building skills at home is especially crucial to Lester.

"We're graduating generations of kids who don't know how to look at paperwork on a car and determine whether they're getting a good deal," she said.

Lester believes leading by example and teaching skills will pay off later on.

"Unless our kids start learning basic concepts to be a good consumer," she said, "they will be forever frustrated and taken advantage of."


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