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The facts of life for children include financial literacy. If children learn to handle money well early in life, they will have a better chance of avoiding the dire consequences of financial errors, ignorance and irresponsibility.

There are those who believe that family finances are strictly an adult concern, beyond the scope of childish innocence. It is clearly inappropriate to burden children with the worries and responsibilities of financial management in the family unit. However, educating them about the choices and processes involved will save them from a rude awakening later, when they start living on their own and discover that credit cards can be maxed out, rent and utilities must be paid in a timely fashion, and budgeting is an essential survival skill.

The teaching process will be easier if the household finances are in order. As always, modeling the behavior you would like to see is a primary strategy for instilling positive behavior patterns. If you can`t afford something, explain that to the children in an age-appropriate, matter-of-fact way. The sooner children find out that financial resources have limits and choices must be made, the better.

Introduce finances into casual conversations. Discuss news items that relate to financial matters. Explain what banks do, how mortgages work, and why people lose their homes in a recession. Without overwhelming them with too much information, keep the conversation open and encourage them to ask questions.

Allow your children to sit with you while you are paying your bills. Show them your credit card statement, so that they understand the consequences of swiping that card. Take them grocery shopping with you, and explain why you are buy the giant economy size, the house brand, or the cereal that is not advertised on TV. When their math skills are up to it, ask them to figure out what options are the most cost-effective, or keep a running total of your purchases on a calculator.

Set a limit on how much you buy for your children. The point-and-whine method of shopping does not work in the real world, so don`t let it get started. Tell them how often you are willing to buy them a treat, a gift, or items of clothing, and how much you are willing to spend, and stick to it. Help them plan ahead by making lists and setting priorities.

Start an allowance early, and make it clear which expenses they are responsible for. Gradually lengthen the interval between payments to help them learn long-range planning. If they overspend and discover that they can`t get something they want or need later, don`t bail them out. Income advances and credit buying can be introduced later, when they are old enough to handle a credit card and pay the monthly bills.

Encourage them to get jobs such as lawn-mowing, pet-walking, or flyer delivery. If you have jobs, above and beyond normal chores, that you are willing to pay to get done, you can offer your children the contract. Hold them accountable as you would any other employee, and don`t pay in advance.

Help your children start their own bank account. Teach them how to write cheques and read a bank statement. Encourage them to save. Start with a short term goal, and gradually introduce the idea of saving, investments, interest, and income tax. Show them how to budget and estimate costs. All these skills will be invaluable after they leave home.

The more children learn about the principle of cause and effect, the benefits of delayed gratification, and the satisfaction of paying for something with money they have earned, the more successfully they will make the transition to financial autonomy.

Learn more about this author, Christine G..
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