Teaching Your Kids The Habit Of Thrift

Studies show that children tend to mimic their parents' thrift habits. If you show them you pay your bills promptly and save for a rainy day, there's a good chance your kids will, too. To help your kids become sound money managers, there are several things you can do to teach them thrift early.

Your Child's Allowance: Not Exactly Child's Play
Most experts agree you should start by giving your kids an allowance when they're preschoolers. But the allowance should be given in small bills earmarked for several budgeting categories - spending, short-term savings and charity. For young children, the allowance should be given weekly and the dollar amount should increase with age. For example, a four year old might receive four dollars per week. Then in junior high, you might switch to a bimonthly allowance and in senior high a monthly allowance.

Look for ways to make your kids comfortable with handling money. For example, have your children figure the tip at a restaurant or ask them to sort out your grocery coupons and mail-in refund offers. Kids love to get return mail!

A Part-Time Job
When your children are old enough, encourage part-time work. Even if they don't necessarily need more money at this time, they will learn about concepts such as income taxes, wage laws and hours worked in exchange for income. Be certain, however, the job hours are flexible and do not interfere with school or other important activities. One study showed that teenagers who worked part-time earned an average of $80 per week, but saved only $5 of that amount. Since most kids are not prepared to handle that much money wisely, it is important for parents to give their children financial guidance.

Savings, Checking and Credit For Kids
To help your kids be smart money managers, encourage them to open a savings account while in grade school. A Holiday Club account is a concept they can grasp, and a Passbook account lets them watch their money grow. In junior high, when they start earning their own money, they may be ready for a checking account and ATM or debit card. (When opening checking accounts for children under the age of 18, Dollar Bank requires a parent to be listed on the account also.) In high school, it's time to explain basic investment concepts.

By the time they reach 18 or 19, they may be ready for their own credit card. A small percentage of 18-19 year olds now have at least one credit card in their own name. It's wise to expose kids to the proper use of credit cards before they go off to college. By allowing them to purchase small items like gloves or books on credit, and insisting that they pay the balance of entirely each month, you will help your children to establish good credit in their names while learning to take responsibility for their credit purchases.

Teaching your kids about wise money management will pay dividends for years to come. At Dollar Bank, we're working harder to bring you helpful information on teaching your children to manage their money wisely.

The information presented in this publication is general in nature; it is not our intention to provide specific advice to individuals or a comprehensive discussion of the subject matter. We suggest that you consult with your financial or tax advisor, accountant or attorney to obtain specific advice or comprehensive information.