Money management for children: teaching kids about investing funds today can help make a better tomorrow

Ebony, Jan, 2005

REARING financially responsible children can be tough in a society saturated with the blinding flash of bling-bling jewelry, cell phones, luxury cars and $100-plus basketball shoes.

One thing the media images do not cover is how to save for an extravagant lifestyle, not to mention, a college education or early retirement. So just how (and when) should parents teach their children about money management?

"When they are very young," says Doshie A. Patterson, branch manager for Chicago's ShoreBank, who has worked in the banking industry for 27 years. "It's important for kids to develop savings habits early on, especially when they plan to buy things that they want."

Patterson, 46, has two adult children, ages 23 and 26. She began teaching them about managing money when they were 5 by opening a savings account. She would take them along while she did her banking and allow them to fill out deposit slips and withdrawal forms. "Children imitate what they see," says Patterson, who is now a grandmother of two and who has opened a savings account for each of her young granddaughters, Amber Nicole, 5, and Autumn Joy, 3.

The financial statements go directly to the little girls. By the time they are old enough for college, each could have a strong grasp of how to save--not to mention a stash of money.

Looking out for the long-term financial stability of their two children early is exactly what Anthony and Kathy Chaney have in mind for 6-year-old Kennedy and 18-month-old Kamryn. The couple lives on Chicago's South Side. Anthony, 32, works as a cable installer for a communications company, and Kathy, 31, works as a reporter on the commodities desk at a multimedia news service. After taking some time off to stay at home and spend more time with the couple's children, Kathy re-entered the workforce. Besides instilling a strong work ethic in their daughters, the couple is teaching the girls about the concept of building generational wealth. Kathy, in addition to her day job, sells real estate. She is also starting an organization for teenage girls to boost their self-esteem.

"We're teaching our kids the whole entrepreneurial thing now. That way they will have it when they go out into the world," says Kathy, who takes her oldest daughter along with her when she shows homes to clients. "She looks forward to it. She says, 'Mommy, are we going to show houses again?'"

Show Them The Money

For the Chaneys and other families there are a number of ways to teach children money management.

1. As soon as the children are old enough to count, you should teach them about money. Buy smaller kids a piggy bank and, later, open a savings account in their name. There are also a number of CD-ROMs that help youngsters identify denominations and count coins by using animation and games.

2. Have family meetings with your kids. Older children especially can benefit from discussions about setting financial goals and distinguishing between wants and needs. For instance, if your child wants an iPod, then you may set up a system where he/she does extra work around the house to earn money to pay for it.

3. Take your child with you to the bank. Allow her/him to help you fill out deposit and withdrawal slips. Explain how credit, debit and ATM cards work. (Some kids think the money that mom and dad pull out of the machine is free.) Later on, you can show them how to balance a checkbook or help manage the family budget.

4. Teach children to evaluate the media images that they are exposed to on TV, radio and in print. Explain that instead of purchasing an expensive toy or athletic shoes, they can buy stock, or open an account, and watch their money grow.

5. Teach children the difference between the CDs (that you play) and the CDs (certificates of deposit) that will make you wealthier. Give them stock certificates and other money instruments for birthdays and Christmas presents. --Shirley Henderson