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Navy Counselor on Teaching Kids to Manage Money

Brian Pampuro is a Work and Family Life consultant for the Fleet and Family Support Center at Naval Support Activity Bethesda.  He is also a financial counselor and a retired Sailor.

As parents, we often agonize over what type of gift we want to get for our
 children during the holidays or when their birthday is fast approaching. One
 of the best gifts that a parent can give their child, is the ability to save 
and manage money smartly.

I bring this topic up often when I am speaking with groups of people or even 
counseling clients on a “one-on-one” basis because it’s a topic that
 generally sparks a lot of interest and generates good conversation.  Since 
April is celebrated as “Month of the Military Child,” there is not a better 
time than now to share some of my thoughts on the topic.  I appreciate my 
colleague, Lee Acker, sharing his blog space with me for the month of April.

So, okay, you and some of our other readers might disagree with my theory.
 You probably feel that the best gift you can give your child is a happy,
 healthy home, built on a foundation of unconditional love. I couldn’t agree 
with you more!  If you raise your children in a happy, healthy home, 
stabilized by unconditional love, they will most likely succeed in dealing 
with almost any of the complexities life will throw at them.  The truth is
 though, even some of the most grounded and stable people I know have not made the best financial decisions.

I want our readers to understand and realize that poor money management
 decisions are not the result of poor parenting, sub-level intelligence or 
lack of educational accomplishment. Based on my experience as a financial
 counselor, I’ve found that most poor money management decisions are made
 because people simply do not know how to manage money and never had the
 opportunity to learn. A lot of our own parents were never exposed to proper 
money management skills or techniques for saving and investing. Think back 
to the days when you were in junior high or high school. Were there courses offered on basic personal finance or money management?  When I ask that
 question in group settings, it is a rare occasion that someone will raise
 their hand. Some school systems are now offering basic personal finance 
classes to your junior high and high school-aged children, but is that

I have heard a variety of things that some parents do to teach their 
youngsters about earning and saving money. Most agree that the best tool
 that you can use to teach your kids money management is to give them a monthly allowance.  In my opinion, allowances should be given as way for
 children to learn money management, not as a means to get your kids to 
perform household tasks. Learning to contribute to the household without
 expectation of a monetary reward is something kids should be taught at an 
early age. If you do that, then whatever you give your kids in terms of an 
allowance can be used to teach them how to manage money.

I would like to offer our readers these six suggestions to help encourage
 your children to save and manage money and to lead them down a path to 
financial freedom:

1) Match your children’s savings dollar for dollar, quarter for dollar 
or whatever comfortably fits your budget.  Wouldn’t you like free money? It 
may be a small cost to you, but the saving habits you are instilling now
will be a great return on your investment later on in life for you and your

2) Give your kids interest on their savings. You can customize the
 interest rate so that their account can grow at a faster rate. This is 
another example of free money and over time, will introduce your child to
 the power of compound interest.

3) A good way to help children understand compound interest is by 
allowing them to “see” their money grow visually.  Over time, even small
 amounts of money can grow at a fast rate. Demonstrate compound interest
using a chart or spread sheet.  For something a little more “kid friendly,”
you can use kids “on-line” savings program such as Smarty Pig 
or Feed The Pig.  Your bank or credit union might offer
 financial literacy programs for children, too.

4) Put your child in charge of buying their own “stuff.” This can be
 done with allowance and is for things like candy, video games, trading cards, cell phone applications, etc. It might surprise you how frugal your child will become when it’s their money being spent and not yours. In addition to helping children learn how to determine “needs versus wants,” the added benefit is that it will save you money in the long run, too.

5) Give your kids a concrete reason to save by having them establish and record financial goals. Make sure the goals are easily attainable in a relatively short period of time. This will increase the chance that they 
will want to establish more goals in the future and you can then increase 
the time and the amount they need to save for those goals, “a bite at a 
time” I say. These goal-setting skills will help them later on when they 
are ready to start saving for a car or home.

6) Help your kids open a savings account at your bank or credit union. Kids love to act “grown-up” and tapping into this opportunity may be the
 spark that ignites their life-long savings habit. Additionally, when their
 money is in a savings account, it is not as easily accessible. Encourage
 your child to categorize their savings into three groups: saving and investing; charity/church/community; and, spending. Recommend that your child 
deposit at least 10% of any money they receive for allowance, gifts,
earning, etc. into their savings. Another 10% can go to the 
charity/church/community category.  The remainder can be set aside for future spending based on your child’s financial goals.

Remember, your children are always looking up to you for guidance and
 direction. If you model good saving behaviors, money management skills and
 savvy consumer habits, chances are your kids will most likely do the same.
 Best of luck to all of you parents that are raising our next generation of




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