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$0.10 to long-term savings and investing, $0.10 to charity, leaving just $0.58 to spend) Then, discuss with your children what you expect to spend for certain categories. Break down what expenses you feel are non-discretionary, and even what you feel are luxury or special event-type spending. You can use this budget during shopping trips, whether to the grocery store or mall, to help them understand why you say "yes" to some expenditure and "no" to others. This approach will also help them understand that there is a finite amount of money to satisfy many different spending desires and that sometimes hard decisions need to be made to balance what comes in with what goes out. Sooner or later, a child will earn her first paycheck. Prior to this, discuss with her that while she may make certain dollar amount per hour worked, her take-home pay will be less. Discuss with her what taxes are used for, especially as they relate to things that are important to her (e.g., schools, police, fire department, etc.) and how marginal tax rates work. Prepaid credit card or debit You may decide to shift a portion of your children's expenses to them over time so they can learn to make financial decisions relating to how much they spend and on which items- and the consequences of those decisions. Consider giving your children a prepaid credit card or depositing money into a bank account on a regular basis that they can access via a debit card. They can then be responsible for using the funds over a specific period of time to purchase items that you have identified during your budget conversation as things that you are not going to cover. You may want to ease your children into these decisions by putting small amounts on a card or in the account and increase the amount over time. The important considerations are: • Let them make their own decisions. • Let them make their own mistakes. • When mistakes are made, don't Having distinct purposes for an allowance may help your children understand that, as adults, they will use their earnings to satisfy short- term needs as well as long-term needs and wants. bail them out! If they are saving for something but end up spending their money on something else, resist the urge to buy it for them. Credit cards At some point, children are going to be introduced to the concept of credit—and for many, that introduction happens at a time and place over which you may have little influence (e.g., when they leave for college and they get their first credit card offer in the mail, or at the cash register of their favorite store in the mall). To prevent this, consider giving older children a credit card with a small maximum limit they are responsible for paying. Discuss with them: 1. How credit cards work 2. Work with them to find a card with a low interest rate and no annual fee. 3. Emphasize that credit cards shouldn't be used to purchase things for which they couldn't otherwise pay cash, but are useful for purchasing things online and that the entire balance should be paid off VUE ON FORTUNE V U E N J . C O M 126

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