Talking to your kids about money: make saving and investing for kids fun, not work! Here's how to help them set short- and long-term goals to become financially self-sufficient

Black Enterprise, March, 2003 by John Bryant, Michael Levin

I think one key is to keep kids knowledgeable but not obsessed with money--to give them tools to manage their money but not be overconscious about it. I teach my kids that money is the means to an end, not the end. Money is the tool to achieve the goal, not the goal.

--Susan Keating, Parent, Banking on Our Future Participant

Some parents say it's easier to talk about drugs or sex with their kids than to talk about money. In this [article], we'll explore how to open up a dialogue with our kids about personal finances.

"The only lecture we listen to is the lecture we give ourselves." So says my mentor and spiritual advisor, the Rev. Dr. Cecil Murray of the First A.M.E. Church of Los Angeles, and I agree.

Nobody likes lectures. Your kids don't like you admonishing them about their grades, their rooms, or their questionable "taste" in clothing. But if you look back far enough, you'll recall that you didn't enjoy being lectured either. The way to inspire your kids is with the inspiration of enlightened self-interest.

Instead of lecturing, bring them into the discussion and allow their suggestions to be heard. Give them a voice in the family's finances. By making family finances a group effort, you will be giving your kids a hands-on opportunity to learn from experience--both theirs and yours.

BE OPEN ABOUT FAMILY FINANCES

Most children, rich or poor, have absolutely no concept of what it costs to live. They don't know how large a rent or mortgage payment is, or even the cost of putting groceries on the table. They can't yet comprehend the effort you put into bringing home the bacon, or even what a pound of bacon might cost. Their knowledge of the cost of clothing consists mainly of that "phat" $100 pair of shoes they covet at the mall.

I advocate financial transparency. This means that your kids should be able to look in and see exactly where your money goes. OK, maybe you don't want to let them know absolutely everything. But by and large, why shouldn't your kids know what life costs? It can be quite a sobering realization for kids to see just how expensive life is. If anything, your kids will respect you even more when they see how hard you work and how quickly money disappears on basic necessities--food, clothing, and shelter. They'll also see that because you are spending wisely, you are able to pay off any credit card debt you may have incurred.

No parental lecture has the power inherent in parental example. If your kids regularly see bounced checks coming back from the bank, they'll have a hard time taking anything you say seriously. If you are financially responsible, your kids will look to you as a role model. And if you are less than financially responsible, they will only be too delighted to follow your example! Let's provide great examples for our kids, because one great example is worth a thousand nagging words.

NOW IT'S THEIR TURN

My [next] suggestion is to give each of your kids, elementary age and up, accountant ledgers and have them come up with their own categories and items. These might include clothing, entertainment, music, and whatever else your kids [enjoy]. Ask them to keep track of their own spending, and maybe give them some kind of reward, financial or otherwise, for every week when they have kept track of their numbers. Give them something that will motivate them to keep on track, even [something] as simple as a day off from chores. Make it into a game or competition if you have more than one child, especially when they're young. Give them the idea that keeping track of their money can be fun.

My friend Jennie introduced me to the Star Chart. Her Aunt Marilyn drew up a list of chores that Jennie and her cousin Brietta routinely neglected to perform around the house. Next to each chore, she put a value--one star, two stars, three stars--with the most despised chores (vacuuming, cleaning the litter box, and so on) receiving the highest star value. After completing a task. Jennie and Brietta would receive the appropriate amount of stars. They would then anxiously look at the bottom of the Star Chart--which acted as a scoreboard of the cousins' participation--to the "star exchange rate," the amount of actual money each earned star was worth. Let's say that five stars equaled one dollar. Once a month, the cousins were allowed to cash in their "stars," so if they had earned 20 up to that point, they had $4 to spend.

While this may sound like outright bribery (or, at the very least, a legal system of child labor), Jennie told me that the Star Chart taught her much more than the simple math involved in converting tinfoil stars to cash (which may be the root of her interest in foreign currencies and exchange rates). Not only did the system encourage her to help around the house with less complaining but also it taught her how to save up for that once-a-month spending spree. Jennie quickly learned that if she used all the stars she had accumulated in a given month (about 35), there was no way she'd be able to buy the coveted dome tent (worth roughly the equivalent of 85 stars!) she'd been eyeing. Instead of spending all her stars, Jennie would buy one or two five-star items, letting the rest of her stars ride until the next month. In three months, she had her tent and a newfound respect for saving and patience.