Teaching kids about money

by Don Kuehn

Among the defining moments in raising children: the day the training wheels come off the two-wheeler, teaching the finer points of the forward pass, her first "real" date, and of course, the talk.

No, not that talk. The one where you explain everything your kid needs to know about earning, spending, keeping and investing money.

Of course there's not just one talk. Helping your children become financially smart and competent consumers is not an event, it's a process. However, a new book written by Alan Feigenbaum and his teenage daughter, Gibora, seems to cover all the bases. Feigenbaum is a certified financial planner and writer whose work can be found on the Internet at CBS Marketwatch and other sites.

A Parent's Guide to Money: Raising Financially Savvy Children (Parent's Guide Press) considers everything from the financial considerations couples should factor into their thinking about having kids to tips and strategies appropriate to every phase of a child's life.

Not many couples view having children as a financial decision, but the costs start well before the blessed event. Consider: the cost of maternity clothes, baby furniture, toys, clothing, cameras or camcorder. Or the years of diapers, formula and over-the-counter medications. Add life insurance, higher health insurance premiums, out-of-pocket deductibles and co-payments.

How about trading in that sporty two-seater for a more family-friendly sedan or minivan? Child safety seats, a larger place to live, childproofing kitchen cabinets, day care or preschool, and on, and on.

When the children get a little older, it will be the cost of driving them to sports activities, music lessons or other enrichment activities and uniforms, instruments, activity fees or equipment.

Don't get me wrong; I'm not suggesting that there aren't rewards connected with having and rearing children. Hey, millions of people are doing it, so there must be something to it. But this column is not about intrinsics, it is about your money. If you don't take into account all of the costs (including opportunity costs, that is, what you could do with, or earn on, the money spent raising children) how can you plan or budget for them?

Modeling appropriate actions does a large part in teaching kids about money. All you have to do is look around at the number of Americans swamped by credit card debt, struggling from payday to payday and making no effort to save toward retirement or other goals to see that the modeling thing isn't working very well.

Even parents who place restraints on their indulgences fail to convey that message to their kids when they whip out a credit card or go to the ATM. Kids begin to think there is an unlimited supply of money that magically slides out of a machine. If parents don't make the connection between money and work, don't expect kids to connect the two.

According to the Kansas Council on Economic Education:

• 28 percent of 12-year-olds do not know that credit cards are a form of borrowing;
• Almost 40 percent of 12-year-olds do not know that banks charge interest on loans;
• 60 percent of preteens don't know the difference between cash, credit cards and checks;
• Kids ages 5-17 spend an average of $3,500 to $4,000 annually.

It's not enough to talk about money if your kids aren't hearing what you're saying. When you sit down with your children, here are a few things to keep in mind courtesy of http://consumerjungle.org.

• Be positive, be confident;
• Don't make it a lecture, make it a dialogue;
• Let your kids know they can always turn to you for advice, information or help on money matters;
• Point out that this is a learning process--for everybody.

The Consumer Jungle Web site has three "camps"--for students, teachers and parents. The site provides information on important topics such as credit, making the most of the Internet, car ownership, surviving on your own, and personal communication devices like cell phones and pagers. In the "Teacher Camp" there are lesson plans and teaching tools accompanying each topic.

A majority of respondents in the "2001 Parents, Youth & Money Survey" sponsored by the Employee Benefit Research Institute, think that their schools should be doing more to teach their kids about money. The facts, however, show that neither schools nor parents do much of a job of it.

The National Council on Economic Education has produced a comprehensive set of curriculum standards based on the essential principles of economics. Each includes benchmarks for students in grades 4, 8 and 12 along with samples of what students can do to demonstrate their understanding of economics (visit www.economicsamerica.org/standards for complete information).

The No Child Left Behind Act (NCLBA), signed into law in January 2002, authorized $385 million to be used by local school districts for innovative education programs including activities that promote "consumer, economic and finance education."

Unfortunately little, if any funding, has been dedicated to economics and financial education according to the Jump$tart Coalition for Personal Financial Literacy, which represents about 140 national organizations and corporations. Where did the money go? Well, to purposes that most of us would think are worthy: hiring more teachers, training, upgrading computers or any of the 27 broadly defined uses outlined in the NCLBA.

If you want to include financial education in your classroom or could use some tested activities to use with your children, take a look at the Jump$tart Web site: http://www.jumpstart.org/ for some easy lessons and more information about the coalition.

A combination of TV ads, less quality time spent with parents and a lack of self-esteem drive kids to define themselves by the brands and logos they sport on their clothes. Just like adults, children learn to substitute spending for unmet emotional needs. The result can be a lifestyle devoid of self-satisfaction or an inability to live within one's means.

If you don't feel competent to teach your kids about money and investing, perhaps it's because you have never learned appropriate financial concepts yourself. The time to correct that situation is now. And even if you are just "staying one chapter ahead of the class," Feigenbaum's book is a good place to start. It includes many references to Web-based sources of information so that anyone who is willing to invest the effort can come away with a pretty strong understanding of what makes the economy tick and what it takes to be a financially solid citizen. Then pass these lessons on to your kids.