It is important to be able to talk openly with your children about money and the money in the family. Sometimes the only time children hear the word is in the context of conflict, as when parents are arguing or they are being denied a treat. Having open talks begins to break the money taboo and teaches them that this an acceptable subject for a conversation, not just for an argument.
The concepts important to teach include how to spend wisely, how to save, how to invest and to accept that there are others in the world who have a different amount of money, both more and less than they do. Discussing feelings such as envy , greed and fear in relationship to money is also helpful. Many parents are beginning to use a system of allowance that includes money to spend, money to save, money to invest and money to give away as a method of teaching mental accounting. I do believe that children should receive an allowance that is not tied to chores; I believe that they should be required to do chores without receiving money for them, just because they are family members who have something of value to contribute. In addition they should have the opportunity to earn if they go above and beyond the assigned chores and do “jobs” around the house.
It is also necessary to teach how to use electronic money when that time comes, probably during adolescence. Loading allowance on a prepaid visa begins to teach them how to track electronic money, which is much harder to track than physical money or checks. Using the computer for financial tasks is yet another area of education that should be undertaken.
There are websites designed to help children understand the world of finance. Quickenkidsandmoney.com costs a yearly fee but gets good reviews. Others that can be useful are younginvestor.com; handsonbanking.org; and kidsbank.com.
If you have other concerns about raising fiscally responsible children, please contact me at firstname.lastname@example.org.