Developing Your Own "Family Economy"

Perhaps getting your child on an allowance and budget system has you inspired by how neatly your child’s finances are organized and has you wanting to take a deeper look at your own. If you really want to get your entire family’s financial life and spending under control, you can use a philosophy that has been dubbed the “family economy.” The family economy is a highly organized system that tracks the inflows and outflows of everyone’s spending against a careful, holistic budget. Each member of the family is inducted into the system at a predetermined age—but at a limited level. For example, at age seven your child might be given an allowance meant to cover discretionary spending, like toys

Helping Your Child with Choosing a Charity

The best piece of advice I can give here is to help your child choose a cause she cares about. Even if you might not be personally invested in saving the pandas, your child might be really excited about it. Pay attention to observations they make about the world. For example, if she expresses concern about the local homeless population, stray cats, or the pollution in your local park, help her explore the ways she can make an impact. If your child is concerned about homelessness, perhaps you can help her identify local soup kitchens. Help her first donate the giving portion of her allowance to the kitchen and then donate her time by volunteering. When you show up for the volunteering shift,

The Children's Piggy Bank: Introducing Your Family to Banking

The great thing about banks is that you’ve probably already introduced your children to the basic concept. As soon as you gave them an allowance and provided them with a place to keep their money, they got exposure to what banks do with you acting as the banker. The trick now is explaining why they would want to keep their money in a real bank as opposed to their piggy bank. First, start with a simple explanation of what a brick-and-mortar bank is: a place to store your money. They will probably already have an idea in place, having seen bank buildings around or read about “Gringotts” in the Harry Potter series (if only J. K. Rowling had thought to include “interest” on those gold coins, how

Investing for Kids: Taking Your Children Down the Right Path

Once your children understand the concept that their money can make money for them when they lend it out to someone, you can talk to them about different ways to invest. First, you have to explain the concept of risk: if you lend out your money, you are taking the chance that you will not get it back. With a bank account, this risk is very low. However, other options regarding investing for kids carry greater risk. So why would you want to make risky investments? The answer is simple: because high risk means that you might have a higher reward paid back to you. The second big idea to teach them if they want to lend out their money is diversification – they should never put it all in one plac

Teaching Children About Money, The Basics of Checks, Credit Cards, and E-Payments

As they grow older, your child might start to wonder how money got its worth and where it comes from in the first place. I think valuing currency is a concept you can save until your children have the right mathematical skills to make sense of it. Fortunately, simple books provide great anecdotes around teaching children about money, doing a great job of explaining things like the United States Treasury and the design of dollar bills. Children’s Money Books David Adler, Money Madness Kathy Furgang, National Geographic Kids Everything Money Betsy Maestro, The Story of Money While this is all great knowledge to have, physical money isn’t the only kind your child sees around them. It’s rare the

The Importance of Teaching Children to Give

What happens on the off-chance that your child isn’t interested in giving away their money or volunteering their time? If you have modeled your own beliefs about charity, this should not be a problem. But teaching children to give is important, so if they are not showing interest it’s time for two things. First, have a serious conversation explaining why you believe giving is so important is certainly in order. Perhaps it’s a problem of disconnection. If so, there is no shame in following that conversation with a site visit to a charity you are involved in to help your child visualize the populations who need their help. Second, your child’s lack of interest might be a matter of him not havi

Should an Allowance be Linked to Chores for Children?

Whether or not an allowance should be given parallel to chores for children has been highly debated in financial education circles. On one side of the fence you have people, like my friend Neale Godfrey, who believe that giving children money not contingent on completing chores fosters entitlement. These people might tell you that the value of an allowance is that it simulates what a job will be like in adult life: you get paid money for hard work. The folks on the other side of the fence disagree. To them, the goal of giving children an allowance is to teach them how to manage money, not how to work. Additionally, some of them argue a crafty child might one day decide that cleaning his room

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