Friday, February 5, 2010

Teach your Child How to Handle Money

It is never too early to talk to your kid about money. Learn some simple principles that will help secure his or her future. By Kaye Langit-Luistro

In most households, money talks are usually forbidden at the dinner table, observes Robert T. Kiyosaki, author of the bestselling book “Rich Dad Poor Dad.” Perhaps parents are afraid that such chats will make their kids materialistic. On the contrary, children get more confused, turning them into slaves of media advertisements and peer pressure.

In time, they may even believe that such products will make them happier, according to the American Academy of Pediatrics (AAP). And if this false impression remains uncorrected, your kid may resort to shady deals to raise money and buy random things.

Redefine Identity
Tell your child that “he isn’t what he drives,” write Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D., authors of the bestselling book “The Millionaire Next Door.” This means that he should not mind status symbols, explains bestselling author Francisco J. Colayco in the book “Making Your Money Work.” “If you think people will respect you because you have the newest and most expensive material possession,” writes Colayco. “you are setting yourself up for financial trouble.”

Rosanna Sorella, a working mother relates that both she and husband Arnold have taught their daughter Arra Nikola, aged 10, the value of this principle all her life. She recalls that when Arra was 4 years old, her dad brought her to the office. During lunch hour, his father’s officemates teased her that she should ask daddy to treat her to a popular food chain store. To that, Arra said, “That’s not included in my dad’s daily budget.” She was not ashamed to tell the truth at all, says Mommy Rosanna.

Until today, her daughter makes decisions based on what she believes is right, not on other people’s standards. Just recently the whole family went to the mall. Arra told them that her school shoes have tiny holes on them. The couple decided to buy her a new pair. Arra tried on several pairs but later abandoned that idea. Despite her parent’s prompting, she said, “buying a new pair is not that urgent and I can always buy new ones next semester.”

Redefine Money
When most parents talk money matters, says Kiyosaki, their usual advice is “stay in school, study hard and get a good job.” They forget that their child may graduate with excellent grades, land in a well-paying job yet struggle financially all his or her life. He or she can make more money but barely have enough left, thanks to future credit card debts, house and car loans, vacations, and groceries. “This is the ‘Rat Race,’” explains Sharon L. Lechter C.P.A., co-author of the book “Rich Dad Poor Dad.”

Redefine Savings
To get out of this impending ‘rat race”, Colayco advices your child to start early and begin saving, investing money from cash gifts during his or her birthday, graduation and Christmas. How much should he or she save? Drs. Stanley and Danko recommend that he or she should start at “15 percent” for it is the simplest strategy for becoming affluent. Over ten years or 120 months, saving P5.00 a day makes him P219,000 richer—and that’s without interest!

Ida Jean Cordon, aged 7 knows this fully well. Her mother Wilma relates that her daughter has two piggybanks at home. One is for her cash gifts during Christmas and the other one for her savings from her daily allowance. “She knows the value of saving money because I always tell her that I don’t just gather money at work,” says Wilma, “I work hard for every centavo.”

If your child continually saves 15% of her money, he or she is on the road of acquiring wealth. “The real beauty of having material wealth,” explains Oprah Winfrey in the November 14, 2005 issue of Newsweek, “is that you don’t have to worry about paying the bills and you have more energy to be concerned about the things that matter…”

Redefine Sharing
And for Arra it is the knowledge that even as a little girl she can make a difference in someone’s life, relates Rosanna. She regularly visits the orphanage and talk to younger girls while brushing and fixing their hair. Rosanna says that during their recent trip to the “Home for the Aged” Arra helped out in making name plates for all the participants. At a very young age, she knows that money is not just for saving but also for sharing. Aside from her time, she also gives money to charity cans at the mall, relates Rosanna.

When you give money, you don’t lose it. Giving actually unlocks the door to financial riches. “Giving money is the secret to most great wealthy families,” relates Kiyosaki. Organizations like the Rockefeller Foundation and the Ford Foundation, Kiyosaki adds, are “designed to take their wealth and increase it, as well as give it away in perpetuity.”

Redefine Investing
Another secret in securing your child’s future is the power of investing. He or she can start using his or her savings, says Colayco, to finance forays into small businesses he or she is really good at and truly enjoys. For Ida, it is selling. Every summer, both she and her mother make and sell yummy delights like fish balls, squid balls, noodles, siomai, “turon” (fried banana slices in a wrap) and cheesticks in front of their house.

Redefine Frugality
Mommies Rosanna and Wilma say that both their daughters are also frugal in consuming electricity and water to help save money. Arra makes sure that when she goes out of any room of the house, the electric fan, and television are turned off. She limits her playing computer games to an hour, says Rosanna, and is very particular, about making the most of used water. “After laundry, she uses the final rinse to clean the garage and waters the plants from the remaining water from drinking bottles.” Ida, on the other hand, regularly checks whether the refrigerator door is shut, according to Mommy Wilma, and the air-condition is turned on only during the hours allowed by her.

“Kids are very smart,” write Drs. Stanley and Danko, “they won’t follow rules that their parents don’t follow.” Since Mommies Rosanna and Wilma have taught by example, their children have learned by example.

It may be complicated at first when you try to teach these smart beliefs in your kid. But if you make teaching fun, exciting and live by example, you will help your child have a brighter future!
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  1. This article gives wonderful tips on raising financially savvy kids. I would also like to add that we as parents need to start them very young. In this regard, the series that I authored, "Finance for Kidz", is particularly useful. It targets kids 5 years and up.
    You can read about them at finance4kidz dot com.
    Prakash Dheeriya, PhD
    Father, Author & Professor of Finance
    Finance for Kidz series
    finance4kidz dot com

  2. Hello Dr. Dheeriya! I appreciate your very generous comments. Will check your article ASAP. More Power!

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