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Teach Your Children the Value of Money


By Corey Smith, Principal Life Financial Representative, Princor Registered Representative

You teach your children to look both ways before crossing the street, but have you overlooked another principle equally as basic? Learning the value of money is something the entire family can benefit from, including your children. Here are two ways to improve your family's knowledge of finances:

1. Make financial concepts seem more tangible.
Make financial theories come to life by demonstrating different principles. For example, locate old newspapers at your local library and compare today's prices with prices from 25 to 50 years ago. Or while you're at the grocery store, teach your child how to determine the best price per ounce. When you are eating out, teach them how to calculate a tip.

You can also try a new twist on playing house with your children. Give them play money to make payments for the electricity, gas, phone and water as if they are homeowners. Vary the cost of the utilities according to the season and add property taxes and homeowner's insurance during appropriate months. Offer the chance to buy privileges, such as deciding which movie to rent or choosing family meals for a week, with the extra play money left at each month's end.

2. Set mutual goals.
Establish joint goals for your family to work toward, like a special vacation or an expensive video game. Create reasonable amounts for each family member to contribute toward the goal. Your entire family will feel a sense of accomplishment when the goal is reached and understand what it takes financially to make such things possible. Teaching your children the basics is important. So, when you're educating them on the importance of not playing with matches, don't forget to include the ABCs of finances.

3. Help your older children start saving TODAY
Even though you may have many years until your child is ready for college, starting to save now can make a huge difference when the time comes to pay your child's college tuition. Or when your child gets a job, maybe you work out a plan that involves him/her putting money aside that will go toward paying for college as well. You can talk to your older children about the best ways to save money, and how to go about doing that.

You may want to run this by your teen: I recently attended a seminar and was asked the question who will have more money between these two savers. Saver #1 puts $50 in the bank each month for 2 years and earns a competitive interest rate. She has access to the money whenever she wants by cash card, internet, or withdrawals at the bank.

Saver #2 takes puts $50 a month for 2 years and puts into a coffee can in the backyard, but the coffee can is guarded by a mean old badger that will let you put money in but won't let you take money out until the 2 year period is up.

Almost everyone in the seminar answered the coffee can in the backyard will have more money in it after the two year period. The key to any savings plan is to start saving today and make sure that your plan makes it difficult to take out money earlier than your pre-determined date. This is why college 529 plans, retirement plans, and cash-valued life insurance works so well. Each of these tools makes it easy to put in money, but it needs to stay in the plan for a period of time and there are penalties for withdrawing money early.

The more you educate your children on the value of money, the easier it will be for them to make fiscally responsible decisions throughout their lives. Furthermore, they learn by watching, so make sure you are setting a good example and modeling good spending/savings habits.

Corey Smith is a Financial Representative of Principal Life Insurance Company and a Registered Representative of Princor Financial Services Corporation, 800/247-1737. Principal Life and PrincorĀ® are members of the Principal Financial Group, Des Moines, IA 50392. Corey can be reached at 952-277-4310.

Categories: Family, Feature Stories,

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New FeatureRelated Articles: Financial Woes: How to Talk to Kids When Money is Tight, Assessing Your Money Values,

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