Have children allocate their allowance into four glass jars — one for long-term goals, one for short-term goals, one for charity and one for spending. This works as a great visual for the concept, Winston said. As the child gets older, they can transition to envelopes then later to the bank.
Parents can co-sign for bank accounts with their children, Elle Kaplan, CEO of Lexion Capital Management — an asset management firm for financial advisement to families — told the Deseret News. This is a fun way for children to learn that through delayed gratification, money can make money.
Back in Atlanta, Bakke, the father of Nicholas and Editor of Money Crashers Personal Finance, said he remembers taking his son out one day after giving him his allowance. "He thought we were going to the toy store."
Bakke pulled into the local bank. "I had him hold onto his $10, but I pulled out $10 of my own and we opened a bank account, essentially in his name."
Bakke showed him how to keep track of his money and explained the concept of interest to the young boy. "He then stunned me by asking if he could put his $10 in the bank as well. I knew then that what I was trying to convey had finally sunk in."
Have multiple conversations with children about finance, Kaplan said. But resist interceding in their spending decisions. You would be disempowering them as adults in keeping them from making mistakes they can learn from.
Learning to give
Learning how to give money can be a means of teaching kids invaluable life lessons, said Lisa Reynolds, saver-in-chief at the coupon company, RedPlum. When children are earning their own income, giving away money becomes more meaningful.
Allotting funds toward charity can also teach children that money isn't only about earning and spending, said Reynolds, who advises parents to work together as a family to raise money for a good cause.
In Hoshcton, Ga., 8-year-old Ava Kofke's parents taught her to distribute 10 percent of her money into a charity fund, which she has used in numerous ways, her father, Danny Kofke, author of "A Simple Book of Financial Wisdom," told the Deseret News.
"One year there was a little girl at my school who lost her father shortly before Christmas. Ava used her 'giveaway' money to buy this little girl a stuffed animal," Kofke said. "Ava actually came to my school and delivered this to her personally."
If Ava continues to apply these lessons in life, "she will be wealthy in more ways than a fat bank account can show," Kofke said.
For children who are hesitant to give funds away, have a conversation with them about the significance of charity, said Reynolds, who is a mother of two boys, ages 8 and 11. "Make it a teachable moment."
Bakke's son has been putting money away for close to a year now and has close to $200. He wants to open a lemonade stand or sell his old toys on the Internet to make some extra cash, Bakke said. "Once kids start understanding the advantages of saving, it becomes infectious."
People who work for money have a different sense of self-worth and a different sense of value with money, leading to a much healthier, better balanced child, Kaplan said. "This is the best gift you can give to your child."
Denise Winston teaches children money management
Rachel Lowry is a reporter intern for the Deseret News. She has lived in London and is an English graduate from Brigham Young University. Contact her at firstname.lastname@example.org or visit www.rachellowry.blogspot.com.
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