Sixth-grader Alex Maria has it pretty much figured out. There's his $2 weekly allowance he gets on Thursdays. "I just blow all of it. It's all gone in the next week." Then there's "the big money."
That's the Christmas and birthday money that comes in from grandmothers and other relatives. It goes to savings and, well, new shoes and Nintendo video games. Soon, perhaps, some may go to the stock market as well.
"I have saved up, and I am thinking of buying stocks from the New York Stock Exchange," says Alex, who is 11. "I feel that if you look into the stock market you can earn more money" than with a savings account. He knows he could also lose money. "That's why I want to look into stock for a long time," he said. "The stock market's pretty iffy right now."
Buying shares of stock, or keeping track of an imaginary portfolio, is one way that youngsters can learn about money and investments. Like most children, Alex says he has learned about money "from school, mostly." But financial experts say there is much that parents can do as well to help their children better understand and develop skills needed to manage money.
"The best way to teach kids about money is to give them an allowance," says Jean Ross Peterson, author of "It Doesn't Grow On Trees," a new book for parents about children and money. She and other experts say that an allowance can teach children about earning power, budgeting, delayed gratification and, most importantly, the idea of saving.
And the holiday season also can provide other lessons. Experts suggest simple things such as Christmas wish lists, bank accounts that pay interest on small amounts and "a giveaway box" to encourage charity. There are also games to play and museums to visit that help children learn more about money.
It's also a good time, they say, for children and their parents to assess their finances and their financial planning.
Include children in discussions of family finances, say the experts, even if it seems tough. "Talking about money is the last Victorian taboo in our society," says Peterson. "Nice people don't talk about money--especially to the child. And that's a shame . . .
"Parents should involve the kids in all of the discussions of money. Kids love money. It's not spinach, although it may be green. They love it."
New York psychotherapist Linda Barbanel, who lectures on children and money, agrees and sees no harm in telling your children how much money you make--or at least talking generally about family finances. "You don't have to show them your 1040" income tax statement. "It's not so they can tell everyone on the block. . . . They need a general idea of how things are going."
If things are difficult at home, they need to know, she said. "If Dad is laid off," Barbanel said, the kids need to be told in an optimistic tone that, "We are going to be fine. The bills will be paid, and Dad may have to work part-time." Oftentimes, she says, teen-agers can be encouraged to pitch in and get a part-time job.
During the holiday season, parents report, money seems to be on the minds of children a lot: gift-giving, the cost of toys, the barrage of television advertising, and, of course, they are quick to pick up their parents' concerns about bills to pay. So, experts say, it's a good time for parents to help their children learn about money. Here are some of their tips:
1. If your children are school age, start an allowance program and make sure it's enough. The amount depends on what the child has to pay for--school lunches, bus fare, etc. And pay it in the middle of the week so the kids get used to holding onto it for a while before spending it on the weekend.
A survey published by Fidelity Investments, the nation's largest mutual fund company, put the average allowance for children in first through third grades at $3.36 a week. A separate survey, for Penny Power magazine, says that half of all kids get an allowance, and the median allowance for a 9-year-old is $2; the median for 12- to 14-year-olds in $5.
No matter how much or how little, they all agree that allowance must include money for luxuries--for hobbies, for treats, for gifts.
"It's very important for them to have a little extra, so they can make mistakes," says Barbanel. "Mistakes are a great learning tool."
But don't provide all the money a child ever needs, Peterson notes, because there will be no incentive to save. "Only when a child spends his own money does he learn to save."
2. Consider subscribing to Penny Power magazine. It's a Consumer Reports publication for kids, aimed at youngsters aged 8 to 14, and has articles on products, problems and money management. The latest issue includes "19 Secrets of Successful Savings," which includes such savings advice as "Get specific. Be willing to wait. Keep it out of reach. Track your progress," and "ground yourself"--don't go to the mall.