Kids & money: Piggy-bank blues

- Andrew Lendnal, CEO, Breakthru Kids


After taking a page out of the Good Parent's Rule Book, you give your
child an allowance, usually accompanied by a little speech about money
management.


Do you tend to poach the bigger denominations out of your child's piggy
bank late at night to pay the baby sitter or for an ordered pizza?


According to surveys, about half of parents don't grant allowances, and
most others do it haphazardly. Its proponents argue that an allowance
can help a child learn about money, that he has to make choices among
the many things he wants and must work and save for them. But there's a
downside: an allowance can be a crutch for a parent. As long as the
child can afford to pay for something - say, a barbed-wire wrist tattoo
- a parent might be more reluctant to say "no".


Some parents also connect money to household chores or school marks,
which I think is a mistake. Your child should help at home because he
is a member of the family and should work hard at school without a
financial incentive.


Carol Seefeldt, a researcher on children's concepts of money at the
University of Maryland, US, says that "If you want children to learn to
make wise decisions and plan and budget, they need more than an
allowance to do that." She suggests that parents involve kids in simple
decisions involving the cost of meals and clothing and teach them to
help comparison-shop for the family.


Our children are already bombarded with opportunities to spend money,
and the options are about to explode through online shopping geared
specifically toward kids. Several new websites especially in the US,
such as Icanbuy and Rocketcash, will set up accounts in a child's name.
(Hopefully we do not see this type of thing eventuate in New Zealand.)
Parents can deposit a small amount from a credit card or use Grandpa's
birthday money as their child's online slush fund. These cybermalls are
only too happy to point a child towards must-have products.


I guess that's a start, but we can do much more to teach our children
that money is not just for spending. No matter what the source of their
income, whether earned or from gifts, children should be encouraged to
save and to give. A system of three piggy banks - one for spending
money, one for saving and one for contributing to charity - is
recommended by many money experts. Online sites can also teach about
investing: younginvestor.com is a good one.


An idea within your own household is to offer your children the
opportunity to take on jobs that you might otherwise pay an outsider to
do, such as garden work. But you can abandon the allowance farce -
after you repay the $257 you owe your child after frequently dipping
into his or her piggy bank. Fortunately your child may generously offer
to let you retire that debt at low interest, in weekly instalments -
you know, kind of like an allowance.

TEENAGERS - Please read!

Financial Peer PressureYou see it, you want it. That's part of being human - no matter how old
you are or how much you have. People are forever looking at what other
folks have - new clothes, a new car, a new CD - and thinking that they
would like to own it, too.


Buying things just because they are "what's cool now" can leave with
you very little or no savings and a closet full of purchases that you
really don't use. According to Linda Goodwin, president of the
Children's Financial Network in Chester, New Jersey, the first step is
to accept that you are not going to have it all. "There are choices in
life, including financial choices. We all make financial decisions that
may not be the best, and we need to live with the consequences," she
says.

Make a budget - a first step to curbing impulse buying

To help you make your financial choices, look at how much money you are
likely to have over a set period of time - for example, the next three
months or a season like winter. Start by writing down your allowance
and income from regular employment. Consider any events where you might
receive money as a gift - like a birthday or holiday. Don't include any
anticipated gifts in your budget. Wait until you actually receive the
gifts before including them. You can always revise your budget to
include any changes to your income.


Next, write down the things that you want to do or buy during the
period and how much each is realistically likely to cost. (Don't worry
about items that your parents will cover.) Things you need to plan for
might include clothing, sports equipment and activities, such as
concerts and eating out. Are you saving for any long-term financial
goals, such as college or a car? Do you plan on giving any gifts? Will
some money go to charity? Is some cash for spontaneous purchases?

How to decide what to buy - ask yourself these questions

If, after making a budget, you discover you want more than you can
afford, you'll need to decide what things to get and what to skip. In
other words, consider prioritising the items you want to buy. Maybe
there are some items that you can postpone purchasing. You'll have to
make some tough choices, and to help you, here are some questions to
ask yourself about each item. There are no right or wrong answers.
These questions are to help you reflect on your purchasing decisions:


Why you want the item? Your best friend might have a new computer game.
Do you want the game because you think your friend's cool or because
you actually want to play the game?


It's also important to ask yourself if you're trying to keep up with
the spending habits of a wealthier friend. It's important to remember
that there will always be people who will have more or less money than
you. Buying something just because someone has the same item is not a
good reason for making a purchase.


Will you use the item more than once? Wanting can be more compelling
than having. Don't blow a big chunk of your budget on something that
never sees the outside of your closet again.


Will a different purchase make you just as happy? Maybe you can't
afford a whole new wardrobe this period, but maybe one or two shirts
will be enough to spruce up your look.


What are the things you won't be able to do later if you make this
purchase now? Buy an expensive pair of jeans, and you may not have the
money to attend a concert next month.


How will this purchase affect my plan for one of my long-term financial
goals? Too many concert tickets now could put off the day you buy a
car, and too many expensive athletic shoes now could put that big ski
trip out of reach.


What if your spending choices match those of your friends? That's fine
- so long as they really are your choices. Get in the habit of making
your own decisions about money, and you'll probably be happier about
each dollar and purchase you make.

Finally, don't ignore your past mistakes.

If last year you ran through your December holiday money by the first
week of January, you might try to pace yourself this season. Or maybe
you bought a CD on a friend's recommendation last year and hated it.
You might think twice about taking his advice again, or decide to
borrow the CD so you can listen to it before you head to the store.

How to be a profitable baby-sitter?

Parents want a night out; teenagers want pocket money. Whether you're
an experienced babysitter or just getting started, you may be able to
increase your financial and personal rewards from the job by becoming
more knowledgeable and professional. Here are some tips:

• Keep yourself safe. Make sure that
  your parents or another responsible adult know where you're going, with
  whom and when you'll be back. Always leave a phone number where you can
  be reached.


• Be informed. Begin by learning about
  the families who want to hire you, making sure there's a good fit
  between your abilities and their needs. What routines and special needs
  do the children have? What's allowed and what isn't? How should you
  handle discipline problems?


• Understanding basic care.
  Children of different ages need different care, from the feeding and
  diapering that an infant requires to the imaginative, safe play that
  will engage a child of eight. Also, you should talk with the parents
  about their child's special needs, likes and dislikes. Make sure you
  know how the parents want you to take care of their children, including
  any "rules of the house."


• Lead the play. "Play is
  the work of children, a way for them to develop physically and
  socially." Make sure that the play is fun and safe. Books and training
  programmes can help you learn about child development stages, as can
  talking with a child's parents. "Ask parents, 'what is this child
  doing, what are they getting into at this stage, what kind of play are
  they interested in and what kind of food are they eating?'" Wright
  suggests.
  


• Keep kids safe. Remember that while you're
  there, you're the responsible adult - make sure you model safe
  behaviour. Know where the first aid kit is kept and how to use it -
  consider taking a first aid course. Make sure that emergency numbers
  are clearly posted. In addition to 111, you'll also want to have
  available those of the children's parents, your parents, a trusted
  neighbour and the doctor. Post the address and telephone number of
  where you're babysitting, too, so you don't forget it in an emergency.
  If you need help, call - even if you're not sure it's a real emergency.
  "It's always ok to call."


• Be professional. While
  babysitting experience and first aid certification courses can be
  important to list on a babysitting resume, they represent only the
  first step toward behaving as a professional. Be on time and prepared
  to give children your full attention. Don't spend time on the phone
  with friends, cancel on short notice, have friends over or eat the
  parents' food without permission.


• Price yourself fairly. Talk to other babysitters about the going rate for your services.


• Have fun! Enthusiasm helps kids feel secure and comfortable - and makes your time together more fun!