Parent's Guide to Financial Literacy: Part 2

As a certified financial counselor, I started teaching my son about money as soon as I could. As a 6-year-old, he could quickly add up a handful of change.

He knows what money is, but when I took a graduate course on family systems I asked myself: "Does he really know money? Understand its real value? Have the foundation for a lifelong, healthy relationship with it?" It might just be fancy paper and metal on the outside, but this will be the longest "relationship" he ever has, so it's best to get him ready now!

After some academic research and lots of chats with parents, I came up with five more tips to help make sure your child’s lifetime with money will have a "happily ever after." (Check out the first five tips here.)

Don’thide your finances.
If you're paying your electric bill, andyour son asks what you're doing, don’t sidetrack him with anotheractivity.

Invite him to sit down and explain that you're paying bills. Inevitably, he will ask what a bill is. This opens a great opportunity foryou to explain that electricity isn’t free.

Youcan even pull out your budget and compare what your anticipated cost for theelectricity was and the actual amount paid. 

Elementary school studentscan easily understand the graphs that show usage over time on your statement(added perk: they are studying math and don’t even know it!). You might even findthem turning off all the lights when they leave a room… one can dream!

Thisworks for teenagers, too. Don’t forget: soon they will be required to handle allof their own finances. You don’t have to show them your whole balance sheet,but let them see what it really costs to live in the real world.

Explainthat the money machine and magic cards are.
When you use adebit card instead of cash, let your child know that the card allows theretailer to take the money needed from your bank account.

Same with those“money machine” ATMs. Let them know that it isn’t a free-for-all and that you'rewithdrawing money from your account. If you use a credit card, explain that you're borrowing money. If you don’t pay it back right away, explain that you have topay the bank money for the privilege.

Make sure they understand that even if it's electronic, money is still trading hands. 

Providethe opportunity to experience financial institutions.
Whenyour child is old enough (generally, around age 7), let them come with you toopen up a child account at your bank or credit union.

Make sure they see thewhole process from start to finish, don’t just fill out an application whilethey're in school. You can even write them “paychecks” for work they have donearound the house (see tip 3) and have them deposit it each week or month.

Thisallows them to understand what banks are, where money is and first-handinteractions with ATMs (“Wow, when I get cash, my balance goes down!”).

If your daughter saved all year for a$100 e-reader but realizes she doesn’t have enough to cover the tax when shegets to the store, don’t make her turn around and go home.

Working so hard andthen being defeated can seriously derail her enthusiasm for money. Instead,explain what tax is, how it's calculated, and then offer to loan her the extra$8 she needs. Or tell her how proud you are and that you're providing her agift of $8 this one time.

Whichever you see fit to do, remember that whilemistakes can be good, we want them to experience the positives that come fromhard work and saving.

Seta good example.
Learning for children is “monkey see,monkey do.” Be sure that you are setting a good example of money habits.

If youtell your child not to constantly buy things just because they want them, yetyou are guilty of regularly raiding the checkout line goodies for things youdon’t need, you are sending mixed messages. Children imitate and are more likely to behave the way you act, not the way you say. 

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