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play dough Teach kids about money matters

April 30, 2006 1:45 am

By PORTSIA SMITH

Your teenage daughter can recite all of the elements on the periodic table by memory.

Your neighbor's son can figure out how to program, download and upgrade just about anything onto a computer.

But can either of them balance a checkbook?

According to a survey by the National Jump$tart Coalition for Personal Financial Literacy, just about half of high school seniors have the basic understanding of general financial concepts, such as using bank accounts, investing in stocks and bonds or saving for college.

While Virginia has recently passed a law that will require educators to give more finance and economic lessons in the classroom, financial organizations say the real teachers should be the parents at home.

"It's never too early to start teaching your children the financial habits that they can use throughout their lives, and everyday life is full of opportunities to teach children the value of money and how to save," said Amida Mehta, director of marketing at ClearPoint Financial Solutions Inc., which has an office in downtown Fredericksburg. "Whether you realize it or not, kids are always observing their parents' spending habits. From putting loose change into piggy banks to distribution of allowance money, parents have a great chance to teach their kids positive money management behaviors."

The Virginia Council on Economic Education has 13 centers across the state that offer programs designed to help students understand basic economic principles and develop the decision-making skills needed to be informed citizens, productive employees and wise consumers.

The nonprofit organization mainly works with teachers, and training is designed to facilitate classroom instruction that prepares students for the Virginia Standards of Learning testing.

The nearest center to the Fredericksburg area is located at George Mason University in Fairfax.

"Economic Fun Night," a 90-minute evening session, is a popular workshop for parents and elementary-school students full of economic-based activities, said program coordinator Rachel Powell.

"It's things you can do with your children at home or at the grocery store that can help them learn," she said.

Area elementary schools can request the free workshop to be held at their location.

ClearPoint and the National Foundation of Credit Counseling suggest parents take the following steps to arm their children with skills that can lead to healthy financial lives:

Like it or not, most children will not necessarily practice what you preach, but instead follow by example. Imagine a child who sees a parent always purchase the latest technology gadget versus a parent who saves for several weeks to purchase a new TV or computer.

Words like "reconcile," "savings," "interest," and "credit debt" are commonplace for adults, but not for children.

Take the time to sit down with young children and teach them what each of these terms means. For older children, start to talk about the importance of IRA and 401(k) retirement accounts and the difference between risk and return on stocks and bonds.

There are Web sites, such as investorwords.com, that can help you teach your child money-related terms. This site offers a glossary with 6,000 finance-related definitions.

Open a savings account for your child--whether it is for a newborn or high school freshman. Show your children how to add gift money or part-time income to a savings account. Or consider purchasing a savings bond or some stock for your child to let him or her see firsthand how the money can grow, and at what speed.

Consider giving your child an allowance and talking about plans to save or spend the money. Explain that if they spend their last $5 on candy, it will take longer to save money for the latest video game or outfit they want.

Let your children see you compare prices, use coupons or negotiate a discount on a large purchase. Take the time to explain how and why you make your purchasing decisions. Show children smart purchasing tips such as sticking to a list of needed items, or purchasing birthday gifts in bulk.

With credit card companies aggressively targeting college students and more parents giving their teenage children credit cards, now is the time to teach children how to use credit wisely. Explain the circumstances under which debt can be used wisely and the importance of paying off the credit card every month--or paying at least double the minimum payment.

Most children don't necessarily realize that their parents don't "own" their house, or realize the products for which people take loans. Take the time to teach children about the importance of figuring a monthly loan within your monthly income, and the importance of paying all bills on time to ensure a good credit rating, which can translate into a lower loan rate.

To reach PORTSIA SMITH: 540/374-5419
Email: psmith@freelancestar.com