By Jason Alderman
Thanks to cherished family traditions like birthday celebrations and presents from Santa and the Tooth Fairy, today’s children are often bombarded with gifts from an early age. In fact, many kids begin cashing in on their baby teeth before they’ve even grasped the concept of what money is and where it comes from.
According to a recent survey conducted by Visa Inc., 94 percent of children under age 10 are visited by the Tooth Fairy, reaping an average of $3 per tooth. By that standard and compared to what some of our neighbors give, my wife and I are relative cheapskates with a $2 for the first lost tooth and a $1 golden Sacagawea coin for each thereafter.
Like most parents, we wrestle with knowing how much is appropriate to give, as well as how we can best teach our kids to appreciate what they are receiving, whether it’s a gift, a necessity (like clothing or braces) or the allowance they earn. Our goal is to share the joy surrounding the exchange of gifts while at the same time using those occasions as teachable moments that will help our kids learn how to manage their money in the future.
For example, our kids learned early on that whenever the Tooth Fairy visits or they get a birthday check from their grandparents, a small percentage goes to charity right off the top to help those less fortunate.
Another portion goes into their savings accounts to help them save for big-ticket items they want; and the rest is theirs to spend or save as they please. We try to allow our kids to make financial decisions and mistakes on their own in a safe environment before the stakes become too high.
If your kids are too young to open a bank account, you can introduce them to the idea of dividing up their money for different purposes by using the Money Savvy Pig, a clear plastic piggy bank with four compartments (save, spend, donate and invest) that was created by Money Savvy Generation (www.msgen.com).
As your kids get older, start having discussions about:
- What earning money means, using your own job and their allowance as examples.
- How to budget for planned and unplanned expenses.
- Needs versus wants – and the concept of delayed gratification.
If you need resources to help guide money conversations with your kids, here are a few helpful financial education sites:
- The Federal Trade Commission’s You Are Here (www.ftc.gov/youarehere).
- The Federal Deposit Insurance Corporation’s Money Smart (www.fdic.gov/moneysmart).
- The U.S. government’s MyMoney.gov (www.mymoney.gov.com).
- Wells Fargo’s Hands on Banking (www.wellsfargo.com/handsonbanking).
- The Jump$tart Coalition (www.jumpstart.org).
- Visa Inc.’s free, fast-paced Financial Soccer video game (www.financialsoccer.com).
If you or the grandparents have the urge to splurge and can afford it, siphon some gift money into a 529 Qualified State Tuition Plan. To learn how they work, read the guides at FinAid (www.finaid.org/savings/529plans.phtml) and the Securities and Exchange Commission (www.sec.gov/investor/pubs/intro529.htm).
And finally, remember that kids often mimic their parents’ behavior, good and bad, so if they see you spending beyond your means to buy gifts, they may follow suit later in their own lives.
Jason Alderman directs Visa’s financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney
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