Our Recommended Book of the Month
"Rich Dad  Poor Dad"
Teaching Kids about Money  (see bottom of this article for ordering information)

 

"Teach Kids How Not to 'Shake 'n Bake' the Books"
(Teaching Kids about Money)
By Donald A. Lee, BSEE

Shaking and Baking" has been a fad in corporate America for many years.  This has finally caught up with corporate gargantuan like Worldcom (MCI) 3.9 billion, AT&T, 50% stock decline in 5 months. Intel has slashed chip prices by 53%, this, of course, begs the question of Xerox, Enron and Global Crossings and more to come.  Don't you think it is time to help your children understand truth and finance?

The Truth about Money

It is not a plastic card that runs endlessly through a machine and requires only a signature!  Recently, a poll taken among the millionaires revealed that in 79% of the cases, their parents had taught them "nothing" about money or investing - in other words, they learned later in life as a survival necessity. When you teach yourself, it just could be that the only value you learn about money is that you need more of it.

Helping Your Child

Your child needs to learn at an early age that a plastic card has consequences.  Every time you go shopping he/she observes you paying the cashier with a plastic card - by association it is MONEY. When your child is 8 or 9, why not show him/her the check which you write to pay for the little plastic card at the end of each month. If you do this numerous times, it will finally dawn on him/her that there are consequences connected to the use of that little piece of plastic.

Teach Kids About Life

As soon as your children are old enough to get on the consumer wagon (ask for anything - Teddy Bears included), they are old enough for their first lesson in finance.

Lesson #1
Set up a savings account and deposit $50 or more into the account. Conceivably your employer has a matching plan for your savings, why not institute the same policy at home. Pay for work (small at first) and increase the pay as the child develops skills.  Match only the money he saves.  Review with them their account statements monthly so they begin to comprehend the compounding effect of interest (not much in today's world). 

Lesson #2
When they have earned enough to obtain their 1st computer, set up a simple accounting system.  Insist that they do the simple accounting and review it monthly with them. They, of course, do all the data entry.  A simple system might be to use a spread sheet or Quicken.

Give your Child a Loan, BUT:

Lesson #3
Charge him/her interest and make sure you collect. Just to be fair, keep it at about 10% monthly. That's better than most credit cards, some, believe it or not, are 18% or more.  This will naturally be a learning experience but it will implant a principle. If you use a credit card, pay it off monthly - never pay interest - live on the cash plan for as long as you possibly can. Naturally, buying homes or possibly cars require financing.

Get Them into the Stock Market:

Lesson #4
With the current distrust of the American public regarding the stock market at 68%, you might want to consider PUT options or just help them purchase 1 share of a Blue Chip Stock. Let them check the stock market every day on their computer. It will be fun listening to them OOH and AAH when they make money and whimper when they lose. 

The Truth, the whole Truth, and nothing but the Truth

The financial lessons learned in childhood will last a whole lifetime. It will link together truth and consequences.  It is parental responsibility to help your child grow up understanding how to handle money wisely.  Be a good model and teach them through real life experiences whenever possible.

If you really want to find out how bad it is out there, try this:
The next time you stop at a McDonalds, Carl's Jr. or Del Taco, hand the sales person a $50 bill (if they will accept it) and ask them to correctly count the change into your hand, not just pass back what the register records.

I am sure schools must teach some of the above principles, its just that I have never happened upon them.  This being the case, we have decided that a very real part of education besides reading, writing and arithmetic - is fiscal responsibility (to stockholders as well as the corporations). Somehow many of the corporate execs in America seem not to have run into that class in school either.  DO YOUR CHILDREN A BIG FAVOR AND TEACH THEM THE LESSONS AT HOME THAT DEAL WITH HONESTY AND FISCAL RESPONSIBILITY.

Elisa Ast All, Editor-in-Chief of Baby Years magazine states:  "As parents, it's our responsibility to teach our kids that there are some things in life we want, but cannot have ... at least until we earn them ourselves. Even young children can be taught the difference between "wants" and "needs," and the concept of delayed gratification. So how can you accomplish this? Here are some suggestions by Barbara Steinmetz, CFP:

  • Establish a savings program. Similar to an employer matching contributions to a 401(k) plan, for every dollar your child saves, you can match it either dollar for dollar or .25 cents for each dollar.
  • Offer a weekly allowance. This gives your child opportunities to save for future purchases. A general rule of thumb is .50 to .75 cents per week per year of age.
  • Open a savings account for your child. It is important that the child see the amount grow. It's helpful for children to set a short-term goal for the money, such as a new toy, so the goal can be realized quickly. Your child may be encouraged to save longer for a larger purchase ... like college!
  • Help your child understand that it is good to give as well as receive. Even with a small allowance, a child can give small gifts of his own choosing. Your child also can donate his old toys to charity. He'll feel good knowing other children are playing with items that he has outgrown.

 Rich Dad, Poor Dad Author
       www.richdad.com  

Robert T. Kiyosaki, Business Owner, Investor, Author, Teacher.

This book will:

      • Explode the myth that you need to earn a high income to become rich
      • Challenge the belief that your house is an asset
      • Show parents why they can't rely on the school system to teach their kids about          money
      • Define once and for all an asset and a liability
      • Teach you what to teach your kids about money for their future financial success

Coauthor:  Sharon L. Lechter, C.P.A., Business Woman, Coauthor of Rich Dad's Cashflow Quadrant

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