AICCCA Urges Parents To Teach
Money Management and Fiscal Responsibility This Summer
Fairfax, VA — June 15, 2004 — In many households, children may still believe money grows on trees. This summer parents have an opportunity to teach the realities of finances and fiscal responsibility to their children.
"Parents have a golden opportunity during the summer to teach children that not only does money not grow on trees, but it must be earned and spent wisely," said Dave Jones, president, Association of Independent Consumer Credit Counseling Agencies.
AICCCA recommends these tips for teaching children fiscal responsibility:
Calculate an allowance — One of the most straightforward ways to teach children fiscal responsibility is to give your children an allowance. Younger children may only be required to cover luxuries such as candy, but you may have older children pay for their own clothes, CDs, and outings with friends with their allowance. When they first receive their weekly or monthly stipend, your children may not make it last. But if you stick to the original amount, as the summer progresses, they will learn how to budget their allowance and learn the value of a dollar.
Encourage an entrepreneur — Lemonade stands, grass cutting, and other small entrepreneurial efforts can be great tools to teach children about basic finances, bookkeeping, and a solid work ethic. Help out your children when they want to run their own business, and do not be afraid to provide them with a "start up" loan so that they can buy the materials needed to sell their good or service.
Hire your own kids — Children can be paid for work that they do within the family, but do not tie their allowance to day-to-day household chores. Instead, pay your children for special projects such as a summer paint job or landscaping project rather than for the more regular chores such as dishwashing or taking out the trash, where all members are expected to contribute daily.
Help your child set up their own bank account — If your child is old enough, encouraging them to deposit money that they have earned into a savings account can be motivating. Rules such as principle and interest can be taught, and those students with checkbooks can learn how to keep a ledger. In addition, a bank account is a necessary tool to learn about credit and credit card debt, which may be the next step in your child's financial growth.
Create a savings-matching plan — Consider matching contributions to any amount that your child places in savings. Just as with an IRA, you can pledge to match the money that your children defer to their savings only if they agree not to touch the money for a certain period of time. If you find that your child may decide to put more money into savings than you are willing to match (which is a good problem to have), you can contribute half or one-quarter of their monthly contributions.
Let them in on your finances — When you feel that your children are old enough, sit down with them and let them see how you handle your own finances. Reveal what you earn and show them where the money goes. You will have the opportunity to explain a wide variety of fiscal topics such as taxes, budgeting, loans, cash flow, and the difference between necessary and discretionary funds. You can even explain your credit card statements, while discussing minimum payments, interest rates, and the consequences of a bad credit history.
As a parent, you have the power to instill healthy financial practices in your children while allowing them to practice money management under your supervision. Make it a goal this summer to give your children a sense of financial responsibility that you may not have had at their age. There is a good chance that they will thank you for it later.
Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call (800) 450-1794 or visit www.aiccca.org.
