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Kids and Money

AS CHILDREN, THE ONLY LESSON
many of us learned about money was to put a portion of our allowances in our piggy banks.

Money, like many things, was simpler then. Some people weren't taught how to balance a checkbook or how credit works, and they later wound up with a wardrobe full of new clothes - and $20,000 in overdue bills.

With the summer months upon us, it is especially critical to teach your children how to handle their finances. Think about it: If you take them on a family vacation, and they see Dad sign for a weekend at a pricey amusement park with a Gold American Express Card, they are more likely to think "gee, that ride was cool," than "can my parents afford this?"

Similarly, if your children work this summer and make their own money, they may drop their hard-earned cash on yet another action-disaster flick and an awful Oasis CD rather than putting the money in a college savings account. To most young people, CD means "compact disc," not "certificate of deposit."

Several sites on the Web teach money management for children. These come in two basic models: those aimed directly at children, and those with messages for parents about instilling respect for money management in their youngsters.

Let's look at child-directed sites first. Several are constructed with the guiding premise that before you teach kids about money, they have to understand what money is. For instance, the Money Matters for Kids Answer Page explains how to get money from a bank machine. "Bank machines are like a big person's piggy bank. You can only take out of the bank machine what you put into your bank account," Money Matters advises. Sounds like basic advice, virtuous enough for kids of all ages to follow.

The piggy bank analogy also is in play at the San Jose, California, Education Network's Kids' Guide to Finances, which tries to show the cool side of investing. "How is investing better than a piggy bank?" Kids' Guide asks. "When you invest, you put your money to work for you! Instead of spending a small amount now, you're giving yourself a chance to have a large amount later."

Several Web sites have helpful articles for parents looking to help their children develop good financial habits. Christopher Lake of Ark Multimedia Publishing's site recommends playing games. One, based on "The Price is Right," recommends that you choose a prize for your child in advance. Then you pick an item in your house, ask your child how much they think it is worth, and say "higher" or "lower" based on their responses. Once they get close to the correct price, have them try to guess approximately how long Mom or Dad would have to work to replace the item if it were broken. If their guess is reasonably correct, they win the prize.

We are even seeing some financial institutions helping to educate young consumers. The fall 1995, issue of Teacher$Talk mentions FutureSave, a student banking program now operating in two Mount Laurel, New Jersey elementary schools.

According to the article, participation in the FutureSave program begins in first grade. Children can make two deposits every month at school (thanks to the cooperation of volunteers and a local bank), with a minimum of 25 cents and a maximum of $20 per deposit. Parents get literature about "creating the savings habit," as well as applications for opening accounts. Junior account holders get savings receipts each time they make their deposits, and bank statements are sent to their homes. It's a creative and relatively low-pressure way of encouraging children to build their savings, ah, interest.

Now, a special invitation. I've been writing Web Wallet for more than seven months. When the weather turns hot and humid, my imagination sometimes can run fallow. Are there any relevant topics I haven't yet covered that are of particular interest to you? Or do you have a question about anything I've written about so far? Write me, and when I get enough questions I'll do a special Mailbag column. I look forward to your questions.

-- Russell Shaw

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Russell Shaw

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