Nearly half of parents say the recession has them talking with their kids about money, according to a nationwide survey by T. Rowe Price's Financial Planning Services Group. But most still wish they were preparing their children more, and for good reason: If you make kids money-smart now, they'll be fiscally responsible for a lifetime. Here's how to get started.
By Celia Shatzman
When it comes to allowance, it's not just the amount you're concerned about -- it's how they spend it. Here's how to teach your kids to do so wisely.
-- DO give your kids an allowance. The general rule of thumb is that kids should get half their age in dollars each week, though the family budget should be taken into consideration. Parents should also keep in mind what they expect their kids to pay for with their allowance.
-- DON'T let grades influence the amount they receive. Kids should know that doing well in school is about them and their future. Encourage effort: A kid can try his best at advanced calculus and still not earn an A, so he shouldn't be penalized. There are many ways to show kids you are proud of an achievement like a great report card without having to break out your wallet.
-- DO let them use their own money, because that's how they learn to value it. When it comes out of their own pocket, they're more likely to feel the impact of their spending.
-- DON'T micromanage. Yes, they'll make mistakes, but the best time for them to learn from those errors is when the dollar amounts and financial consequences are low. According to a survey by T. Rowe Price, 41 percent of parents who give their kids an allowance say their kids always or sometimes ask for more money. Instead of doling out more dough, ask your kid to write down every purchase. He'll see where he can cut out extras to trim his expenses.
-- DO set up a savings account for your children, whether through a real bank or ThreeJars.com, an interactive tool that allows children to responsibly earn, track, and spend their own money by divvying it up between Save, Spend, and Share jars. Anton Simunovic, founder of the site and father of six, believes that eventually most types of banking will be done on the Internet, so it's in their best interest to get familiar with tracking and balancing their finances online now.
Online teaching tool: ThreeJars.com, which is targeted at 6- to 13-year-olds. "I created the site because I wanted my kids to learn to live within their means," says Simunovic. "This recession has shown us that knowing how to use money is a life skill. If kids aren't taught how to manage their funds from a young age, it ends up managing them. In the same way that parents who want their kids to be good at a sport start them young and make them practice -- well, it's no different with money."