Finance Wanted.

By Phelicia Boone

The best present a grown up child could give to a parent is the gift of independence. Independence means the young adult is financially responsible, holds down a job, visits family but has his own home to return to. In an ideal world all children would grow up to do these things. But due to various circumstances this does not always come to pass.

So how can you help your children become independent adults? This article will describe several ideas you can employ to get your children financially savvy.

Teaching Financial Responsibility to Young Children

• Teach your children about what it means to work for a living and to collect payment in return for those services.
• Teach them how the payment that is received for work is taxed, which then becomes disposable income
• and is then used for essential living expenses which then becomes discretionary income,
• and then what remains can be used to save for upcoming expenses and events,
• as well as fun money which is the residual after all responsibilities have been addressed.

Speaking of fun, when it comes to children to keep their attention, you need to make this exercise fun. Money management for adults can be such a chore. If it is imparted as a chore, a child may not be as receptive of the learning experience.

So here's what you may do. At a very young age, say four or five, give your child a piggy bank. Teach him how to deposit pennies and other changeand get them used to the "deposit with no return" concept. At a specified time, let's say after a year, you and your child open the piggy bank, and together count the contents practicing his learned counting skills.

The next step is to convert the change inside to bill denominations. Purchase an inexpensive clear coin machine to let your child see his collection of different coin denominations. Purchase another bank to hold the dollars. You can also teach your kids to bank loose change and any small monetary gifts. Larger monetary gifts should be deposited into a bank account or bond for your child. At a specified time, say quarterly, have your child convert the coins to dollars and move the dollars to the second bank. Have your child continue this savings effort for a year.

While you impart savings skills to your child also impart practical spending habits. This should be done as part of your daily household upkeep, like shopping for groceries, purchasing clothing and other required personal and home items. Try not to instill overindulgence by catering to his every request for whimsical toys or candy in the store. You may also have your child reimburse you for some of his reasonable requests. This is your opportunity to interject the concept of withdrawing funds. Be sure to encourage your child to replace those funds for another future event.

As your child gets older and understands the concept of saving and withdrawing, you can purchase a small ATM machine bank. Let your child exercise depositing and withdrawing from the bank. This is your opportunity to introduce the concept of a check book. Have your child learn to write deposit and withdrawal entries into some type of ledger.

As this takes root, your child will have learned some basic skills in financial responsibility.

Let's take it one step further. By now you may have started employing your child to do small odd/end jobs around the house that suits his age range. Have your child practice taking out what would be referred to as taxes. Put this money aside in a piggy bank of sorts and at the end of the year, let them pick out a charitable gift for another less privileged child. Encourage him to practice the gift of giving. But don't neglect to distinguish the concept of taxes in its real sense from the practice of charitable giving. You might even provide an explanation of where the money in your paycheck really goes: Federal and State income tax, unemployment, FICA, and then the multitude of other expenses.

I know this may seem like a lot for a kid, but believe it or not, children are what you make them. So start early and expose them to the best financial experience you can. It may even cause you to practice what you preach! And that may not be such a bad thing!

Phelicia researches and writes about financial topics that affect our everyday lives. She and her husband actively maintain a website which provides all types of major credit cards to meet your financial needs.

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