kids-moneyThe summer is officially over. No more vacations and summer camps. It is back to school for kids and teenagers. This is also a good time to teach kids how to deal with money. Despite a quickly changing money world, with the Internet, online banking, and other new ways of doing business, the fundamentals of what you need to know about money will stay the same.

Teaching children at an early age the value of money can reap rewards for them and for you–especially when your kids become young adults. Here are some suggestions for helping your children understand the relationship between money that comes in and money that goes out.

Grade School

Weekly allowances are a good way to start a child’s financial education. They can help kids develop a sense of responsibility for “their money.” Even a modest amount given to a child each week can encourage kids to discover the value of money. It helps them to understand that the allowance can buy things they need, and that there is a limited supply.

The routine can teach children the importance of saving if they wish to buy something that is more expensive. By doing a little bit of math, children can figure out themselves how long they will have to wait for an extra reward.

Saving can also be fun! Putting money in a piggy bank is the first step to a savings account.

For birthdays and other special occasions even young children are often given some money from relatives. These are good opportunities to start a savings account in a child’s name. Now, the child can take his or her savings from the piggy bank to the real bank, as well as learn about interest rates and the value of time. It will also make children feel more independent and grownup if they have accounts in their own names.

If you think your children are getting too many toys or expensive items as Christmas or birthday gifts, suggest to close relatives that they might instead consider giving savings bonds. Then, if a savings bond is given, explain to the child how much the savings bond is worth now, and what it will be worth in the future. Keep the bonds in a safe place and provide your child with a record of the amounts.

In addition to teaching kids about the importance of saving money, you should also teach them how to spend money wisely. Taking kids to the supermarket can be a daunting task but also a good teaching opportunity. Get your children to help you comparison-shop for a few items. Read the shelf labels on, for example, several brands of canned tomatoes, and ask your kids which are the least expensive for the same size.

Kids at this age can even learn a bit about earning money. If there are extra chores that kids can perform around the house, then you can reward them with additional pocket money. Tasks that need to be done on a regular basis are especially useful for developing a sense of responsibility and reward: If the tasks are not done on time, then no extra money!

Junior High

Continue allowances, but adjust them upward. If you have not done it already, tie allowances to performing certain household chores. For big household tasks–e.g., cleaning the basement–consider paying “wages” to your child. Encourage continued and regular savings-account deposits–from allowances and from “extra” money.

The junior-high years are also a good time to encourage kids to think about the difference between what they need and what they want. Since almost everyone wants more than is actually needed, it is important for children to learn the difference. Explain to them that things like food and housing are essential needs, while other items–such as the newest T-shirt featuring a favorite sports team–are not.

Even if you can afford to provide much of what your children want, it might be a good idea to teach them that one day they will still have to make trade-offs. If your child wants you to buy that new shirt, consider giving up some other wish. Giving children choices can help them learn to set their priorities.

High School

High school can be a challenging time for parents. Peer pressure exerts more influence at this stage and can change priorities for teenagers. Their desires–e.g., clothing, dates, and cars–can also become more expensive for parents.

Sometimes it is better to talk about these potential conflicts before they arise. Take the time at the beginning of the school year to brainstorm with the teenager to discuss expected needs during the year. If you are going to provide an allowance, talk about the amount, what it is expected to cover, and whether any regular household tasks will be done in exchange.

Reinforcing values linking money to work–either at home or outside–can be particularly important for teenagers.

Many teenagers hold part-time jobs while they are in high-school. This can be a good experience and important preparation for their future work life. It also helps teenagers to save and buy things they value highly. It can be helpful to introduce them to more alternatives regarding their savings. With college and other opportunities in sight, teenagers often understand the value of saving money they worked hard to earn so that they can receive the benefits later. Making regular savings deposits is an important habit that will help them along.

However, it is important that teenagers do not neglect their school work. Too many hours on a part-time job during the school year can cause problems in school. While it might be tempting for a youngster to achieve an immediate financial goal–e.g., buying a used car–it is important to explain the consequences of neglecting studies, which can cost a lot of money in the future. Bad grades can limit opportunities for scholarships and college entries.

Even giving a loan to a teenager can be a learning tool. If the teen has an eye on something that extends beyond current means, a loan from his parents may be the answer. If your teen asks for a loan for a major purchase, and you’re willing and able to provide it, consider setting up a “loan agreement,” with payments and due dates specified.

Usually children learn how to handle money from examples set by their parents. You can give your child a boost toward becoming a good money manager if you manage your money well yourself. Involve your children in the family’s financial decisions, such as planning a vacation within a certain budget. Also, if the family is having financial problems and needs to cut back on expenditures, bring your children into a discussion of the options.

Students and Credit Cards: Even after high school children often need financial support from their parents, especially if they continue their education and go to college. Many parents choose to provide students with credit cards for emergencies, or to ensure that a temporary lack of cash does not turn into an unnecessary crisis.

However, before turning over a credit card to a teenager, parents should make sure their kids understand the implication of buying on credit. Especially important is to explain that missing payments can add dramatically to the costs of credit cards and put a bad mark on their credit records. Explain to teens that buying something on credit does not mean they can defer payment for a long time.

Having a credit card can help educate young people about the importance of a good credit record. If your teen shows responsibility in using a credit card, this can establish a good track record of using credit, which can be helpful in obtaining a loan after college or buying a first house.

Teach teens what to do if their credit cards are stolen or lost. Being prepared for such an eventuality can help lessen the damage and the stress. Also, you should teach your children the significance of protecting their credit cards and personal information. Even simple rules, such as making sure not to leave the credit card receipt in the store, and not giving out your credit card number to unauthorized persons, can reduce the chances of disaster.

Credit cards are often used to buy goods and services over the Internet. Many teenagers are more comfortable and knowledgeable about computers and the Internet than are their parents. Still, you should remind your teens to be responsible while using credit cards on the Net. Following sensible procedures such as making sure to deal only with legitimate Web sites, checking credit card statements, and not providing credit card information through e-mail should become second nature for the young user.