Raising Money-Wise Children

Most parents do just about anything to ensure that their children have the skills to succeed in life. However, fewer than 40% of parents talk about credit cards, debt or family finances with their children. While it's possible your child might get some education in financial matters through the schools, it’s not enough.

According to the National Council on Economic Education, an independent nonprofit organization dedicated to increasing financial education for students in grades K-12, only seven states — Alabama, Georgia, Idaho, Illinois, Kentucky, New York and Utah — require that high-school students complete a course in personal finance.

Even if you could use a lesson or two on the finer points of personal finance, that doesn't mean you can't raise money-wise kids. For added motivation, consider that the smarter your kids are about money, the less likely they'll hit you up for cash when they enter adulthood.

There are five basic concepts that parents should teach their children:

* Earning
* Saving
* Spending
* Accounts
* Credit

Earning
Getting paid for household chores like keeping their room clean or making their bed each day instills in children a good work ethic. And having some disposable income teaches other financial lessons, like saving and spending.

Savings
Teach your child to prioritize and save for what he really wants. Have your child draw up a list of the things he wants most. Next, have him do some research by looking in newspapers, on the Web or in stores to discover how much things cost. Then, help your child prioritize his savings goals. And remember, this is his goal, not yours: assuming it's within reason, let the child purchase what he wants. An SCCU "My Way" account can make saving more fun. You can name the account as you wish. NO opening deposit is required, so why not open one online to get started toward your goal?

Spending
Use everyday shopping experiences to teach your child how to spend thoughtfully and intelligently. Talk about what things cost and the difference between needs and wants. At the grocery store, for example, compare prices between brand-name products and generic ones. When shopping for a car, bring up the after-purchase expenses like interest and operating costs. Also, talk about why you forego certain kinds of spending like choosing not to eat out in order to save money for a vacation or for their education.

Credit Union Account
A child as young as 10 years old can learn the basics of interest, writing checks and financial responsibility. Karen Johnson, of Carlsbad, CA, was surprised at how opening a youth savings account changed the thinking of her son, Zach. Before the account, Zach would spend gift money and allowance on toys. Once he deposited his money in a savings account and was told to manage it, Zach didn't want to deplete it with frivolous purchases. "It gave him a real sense of security to know he has $500 in the bank," says Johnson.

Credit
Parents can teach the concept of borrowing when the child is saving for an expensive toy. After the child has saved half the amount of the toy, allow her to borrow (if she so chooses) against her future allowance to make up the difference. Explain that over the next few weeks she will have to pay back the savings portion of her allowance. You may consider adding an extra week to teach the cost of interest. Sounds tough, but better Suzy learn about paying down debt from you, now, than from a credit card company later. Nothing beats actual experience when learning how credit works. Open a low-limit, share-secured Student Credit Card and help your child learn about credit while still under your watchful eye. You'll be helping your child build a good credit history, which will benefit him greatly when he applies for jobs, rents or purchases his own place, or applies for an auto loan.

The Credit Union National Association (CUNA) offers several things parents can do now to help their children get on the right financial path.