Talking to Your Kids About Money

Talking to Kids about Money
In 2005, the Council for Economic Education, with funding from Bank of America, published a classroom curriculum series called “Financial Fitness for Life.” One component of that series was a book called “Talking to Your Kids About Personal Finance.” They published this book because a key ingredient for any child’s successful learning is parental involvement in their education. The book includes activities that parents and students can participate in together at home. The activities in the book are divided into the appropriate grade levels (K-2, 3-5, 6-8, and 9-12). In addition to the activities, the book includes an overview of the content covered, and a listing of additional resources that are available.
The 9-12 parent guide covers the following themes with several activities for each theme:
• There is No Such Thing as a Free Lunch (The Economic Way of Thinking)
• Education Pays Off: Learn Something (Earning Income)
• Tomorrow’s Money: Getting to the End of the Rainbow (Saving)
• Spending and Credit are Serious Business (Spending and Using Credit)
• Get a Plan: Get a Grip on Life (Money Management)
Sample Activities
Credit
Making only the minimum payment on a credit card can be a bad idea. You pay more in the long run—often a lot more. It can take forever to pay off a loan this way. Use parent activity worksheet 9 (not included here) to see the interest and balance paid on a loan by paying only the minimum. Do it over paying a higher minimum--$50. Calculate the difference.
Investing
Mutual funds are not all alike. Some charge a sales commission called a load. Some charge a 12B1 advertising fee. They have different objectives, different operating costs, and different performance results.
• Get a few mutual fund prospectuses. Call their 800 numbers, visit the investor relations sections of their web sites, or write to them. Look for the following with your son or daughter:
o Type of fund
o Objectives of fund
o Annual rate of return for the past three years
o Load fees
o Operating expenses per share
o Level of risk—low, medium, high
o Minimum investment required
• Pick the fund that is best for you after a discussion of the facts about each one.
Budgeting
Get your child to list his or her short-term goals or things they would like to purchase in the next year. Write down how much each item costs. Now, figure out how long it will take your child to earn enough money, based on his or her weekly allowance or income.