VUE

O ne of the most important life skills we can teach our children is how to handle money- how to save it, spend it, budget it, invest it and borrow it. However, while school classes typically include math, science and English, most formal educational programs leave financial skills out of the curriculum. According to the National Financial Educators Council, "the majority of children today never receive money management coursework during any level of schooling that will help them earn more money, yet no time to spent teaching them fundamental personal finance lessons". Many of our clients tell us they would like to take a proactive approach to educating their children regarding spending and saving money wisely. In a survey conducted by Visa in 2012, however, 66.1% of parents in the U.S. talk to their children about money management issues at least once a month- and 18.5% of survey respondents said they feel that teenagers and young adults are prepared to manage their own money. These figures indicate that parents are not effectively communicating financial management skills and that children may be ill-prepared to make sound financial decisions in the real world. Many parents begin working with their children at an early age to develop the financial skills they will need as adults. Below, we discuss some of the strategies these parents use to help their children develop good money management skills. Allowances An allowance can be a way to introduce the concept of money management and budgeting to your children. The question of whether to link an allowance to chores varies from family to family. If you choose to give your children an allowance, you may wish to encourage them to divide the allowance into a number of different buckets: 1. Save some: For larger purchases down the road (e.g., iPads or clothes that you otherwise would not buy them as part of your normal expenditures). Discuss with them what they are saving for so they have a goal to work toward. 2. Spend some: For immediate spending 3. Invest some: Money that you want them to invest for the long term (e.g., for a college fund, a car, etc.) 4. Give some to charity: Work with them to choose a cause that is important to them. Encourage savings You may choose to match some or all of what the children save. For instance, you could match dollar for dollar, or $.50 per dollar. This may help children understand how important you feel it is that they save, but may also encourage them to save more toward a fund to use for larger purchases in the future. You can accumulate the savings for them and then go to the bank with them each month to make a deposit, familiarizing them with how banking works. When the bank issues account statements each month, you can sit down with your children to review. Once children get used to putting aside certain amount or percentage of their allowance or earnings, they may be more likely as young adults to continue this practice, whether or not a match is made. Responsible spending While saving and investing are important, so too, is learning how to spend responsibly. Discuss budgets Consider talking to children about the various ways your household uses the money it earns-savings, charity, taxes, spending- to reinforce the concept that money earned is not entirely available for discretionary spending. You can help them understand how much of each dollar goes to different categories (e.g., $.20 to taxes, $0.02 to vacation savings, Through education and encouragement, parents can help provide their children with the skills necessary to make a lifetime of good financial decisions. TEACHING CHILDREN ABOUT MONEY By Anthony Cristiano VUE ON FORTUNE V U E N J . C O M 124

• Cover