YOU CAN NEVER BE TOO YOUNG

From the time our children are beginning to crawl we start teaching them about right and wrong, personal safety issues and morals.  Through the years we warn them about stranger-danger, alcohol and drugs.  We try to set good examples for healthy eating and personal accountability.  Why do so many parents neglect to teach their children one of the most important survival skills they're going to need – how to take care of themselves financially?

We certainly teach our kids about spending money, but this is setting them up for future failure.  Kids are constantly exposed to the emphasis on buying power but this comes at the expense of other important money skills that kids need to learn – earning, saving and sharing.

MONEY IN ACTION
Parents have to talk to their kids about money from a very early age as this is when good habits start to form.  It's important for kids to come into contact with money, learn where it comes from and understand how it is used.  Encourage your kids to play “store” at home.  Let them put coins in the parking meter.  Let them swipe the credit card when you get groceries.  Bring them to work with you.  Bring them to the bank to open a savings account.

I believe in allowances for kids who are ready to start doing age-appropriate things around the house, like watering the plants or setting the table.  It is important to use the allowance as a teaching tool.  It's never too soon to start teaching financial responsibility.  Even kids as young as 5 can benefit from the idea of budgeting – the child should set some allowance money aside to spend, some to save, some to share with the community.

This helps kids make better decisions and learn to delay gratification.  The time spend deciding what to buy with their own money, what to save for and what causes to contribute to also builds character.  Another benefit is valuable quality time with mom and dad.

Talk to your kids about money and keep talking to them about it as they grow.  The lessons learned will stay with them for life.

PAY TODAY OR LAYAWAY

The Christmas buying season is here even earlier this year.  We're looking forward to Thanksgiving but the stores already have their sights on maximizing their Christmas bottom line.  Holiday sales are expected to rise 4.1 percent this year.

It seems that our kids just went back to school and the leaves are still on the trees, but the major department stores have already begun their layaway service.  In fact WalMart and Toy “r” Us began a full month earlier this year.

Layaway is a good tool to help you with your shopping and budget.  Using layaway has several advantages – helps you avoid impulse buying, forces you to budget and helps you to avoid getting into trouble with credit card debt.  You can do your own layaway at home with your kids.

In MONEY DOESN'T GROW ON TREES, I teach my Four-Jar Budget System which is saving and budgeting for kids.  Allowance money is divided among the four jars: Charity, Quick Cash, Medium-Term Savings and Long-Term Savings.

Medium-Term Savings is actually layaway at home.  It teaches deferred gratification.  Help your child make a goal to save for.  Go window-shopping at your favorite department store or on the internet.  The age of the child should determine how long the saving should take.  The older the child the more ambitious the goal. Yes, you're teaching delayed gratification, but you're also teaching gratification -   three weeks is a long time to a toddler.  It's a good idea to print out a picture of the item being saved for and attach it to the Medium-Term Savings Jar as an incentive.

When my kids were young we used this method.  You may be surprised to find out how different your kids are from one another.  My son decided he wanted a Walkman – the prehistoric ancestor to the iPod.  My daughter had her sights on a special pair of designer jeans – some of you might be old enough to remember all those commercials  with Brooke Shields – those jeans were all the rage.  

Both kids were certain they knew what they wanted and were patient enough to save up but a funny thing happened along the way.  My son never wavered.  He knew he wanted that Walkman and nothing was going to stop him.  After a few weeks of saving, those must-have jeans no longer seemed so must-have to her.  She decided – and it was her decision – that a pair of regular jeans would be just great.  The logo on the rear pocket wasn't as attractive as it had been.

They both learned valuable lessons.  My son treasured his Walkman for years.  In fact, he took amazing care of it.  My daughter discovered that it might not be so important to have the most expensive item just because it's the trendiest.

As with all good tools you need to do your homework in order to use in-store layaway safely and correctly.  Make sure you read the fine print before you begin.  Putting an item on layaway involves getting into a contract with the store.  Read the rules, payment schedule and fees.  Some stores have eliminated up-front fees.  Others even offer a bonus gift card when your order is paid for. Make sure you really want to buy an item before putting it on layaway.

If you decided not to purchase an item, fees can be costly.  For consumers who don't pay on time or decide to back out, money will be lost [wasted].  Not only will you not get your merchandise, you also don't get your service fees back.  In many cases there is also a cancellation fee.  You will get back any payments you made minus the fees – in the form of a store credit.

Layaway at home or layaway at your favorite stores, it's going to be a long shopping season.  I want you to stay financially healthy.  If the stores are already trying lure your dollars away from you, it is certainly time to make your holiday budget.  After you make your own budget be sure to help your kids with theirs.  Be honest with your budget and be sure to stick to it.  Don't go into debt in the “spirit” of giving.

ALLOWANCE FOR TEACHING

According to a survey by the American Institute of CPAs, parents give their kids an average of $15 a week which adds up to $780 a year with older children receiving more than younger ones.  According to CNNMoney, parents say that their kids are spending their allowance as soon as they get it. That's human nature, isn't it?

Let's take a time out.  Financial literacy is learned and parents need to begin teaching their kids about money early on.  These lessons can start as early as three years-old and continue into adulthood. The fundamentals stay with us for life.

In MONEY DOESN'T GROW ON TREES  I teach my Four-Jar Budget System at length.  This is a system I created when I first began working with kids and families – it really works.  Let's look at the most basic principles.

The first thing to remember is that an allowance is “work for pay” - “work” being a series of age-appropriate chores.  Turn “pay day” into a ritual which means you should distribute the allowance once a week at a specific time. I suggest paying your child $1 for every year of age – for example, a 5 year-old gets $5.

Now about the “jars”, they can be envelopes or even plastic bags but they should be see-through.  The first jar is for Charity.  The second jar is for Quick Cash.  The third jar is Medium-Term Savings.  The last is for Long-Term Savings. Each should be labeled.

Charity is 10 percent off the top of the allowance.  This is how you teach your child the value of giving.  It also opens up a dialogue to discuss your family values.

The balance of the allowance is divided equally among the remaining three jars.

Quick Cash is is there for whatever your child wants to spend it on within the parameters of your family rules.

Medium-Term Savings is for a plan you have made with your child for something that might take three weeks or more of saving.  This is how you teach deferred gratification.

Long-Term Savings is to instill a sense of investment in his own future. I suggest saving for college. As the child grows, this money gets put into a bank account and later into other investments.

Now you have the framework to help teach your child the basics of saving.

TEACH YOUR CHILD THE “WHY” OF SAVING

We have a very low success rate of saving in the United States.  According to the Wall Street Journal, savings fell to 3.6 percent of personal income in the first quarter of this year.  We have to start teaching our children about saving when they are young.  The key is to make saving a habit and I start these lessons when a child is as young as 3 years-old.

Begin by explaining to your children that we save in order to get things we want in the future, but also to get things we will need in the future.  It's difficult to think about the future when you're young because most children think of the future as next week, after dinner or five minutes from now. A three year-old is not going to understand the concept of long-term saving, neither is a ten year-old.

In “Money Doesn't Grow on Trees” I explain that saving means putting something away in a safe place to be used, if necessary, at another time.  I suggest having your kids make a list of things you can save besides money.  Squirrels save nuts to eat during winter; most of us save empty bottles and cans for recycling.

In my Allowance System for Children it is a rule that they save some of their money for long-term.  With your help, they have to decide what they are saving for.  I like to suggest saving for college. A good savings plan begins with setting goals.  Talk to your children about what some of their longer term goals could be: a house, a car, other large-ticket items.  Explain that it takes planning and unless you think about these expensive items when you are younger, you probably won't have the money to obtain them later on.

Explain that a goal should be realistic and obtainable.  If you know that you and your children will never be able to save enough for a private college, don't set that as a goal.  The goal should be state school tuition but acknowledge the possibility that your child could get a scholarship to that private university.

Remember, at this point, they don't have to plan out their entire life but it is important to set aside money each month.  Financial planners recommend putting aside 10-15 percent  of one's net pay for savings.  The point is to create this habit of saving while the children are young and “pay yourself first”.  That means putting your own money aside each time your receive it for your savings goals.  Explain what college costs today and what they could be when they are actually ready to go.  Make sure they understand how prices rise.  They need to understand real budgets, real money issues and what it will take to save for real goals.

Grandparents, Grandkids, and Money

I made it—I’m a grandparent!  It's the best!  I see them once a week and am way more involved than my parents were with my kids.  I’m not alone.  70% of grandparents see their grandkids at least once a week.

We want to be the “cool” grandparents and sometimes we think cool is buying things for our grandkids.  Okay, I’m guilty!  My daughter caught me saying to my granddaughter (her daughter), “Can you say grandma is going to buy you a pony?”

Here are the rules: we do want our grandchildren to be financially responsible—so help your kids to start an allowance system and be supportive.  Supportive does not mean when you see the grandkids working and saving for, let’s say, that new gadget, to surprise them with it as a gift.  Remember when you were young and saved for that first bike or stereo?  That felt pretty good when you reached your goal.  Let your grandkids experience the same reward.  They will remember the time you spent with them way more than the stuff you bought.  I promise!