You don’t have to be a financial expert to teach your child smart money habits. In this segment, Mellody shares practical advice on creating everyday opportunities to teach your kids financial responsibility.

How can I teach my kids about money when I’m not a financial expert myself? – Deanna, St. Louis MO  
Deanna’s asking a very popular question because many parents find it challenging to teach their kids about money when they are uncomfortable about the topic themselves.  The good news is you don’t have to be an expert to pass on good financial habits to your kids.  The best way to teach your kids is to be a good role model.  Young children emulate their parents, so showing and talking about good financial practices with your children will slowly build and reinforce their understanding of these essential habits.  You can begin by involving children in family money matters whenever possible.  Talk to them about the importance of paying your bills on time and not spending money beyond your means.  Every time you pull out your credit card, make it a teachable moment.  Explain how you will owe money charged to your credit card at the end of each month.  When the bill arrives, tell your kids about making it your goal to always pay the full balance, and explain the concept of interest.

How early should you start teaching your kids about money?
A study conducted by ING Direct found that parents are more prepared to talk to their kids about sex, alcohol and drugs than about money and finances.  I know that, like any other topic, parents probably want to put this off as much as possible.  But just like anything else, if you put off educating your kids about money, someone else will teach them, and unless your next door neighbor is Warren Buffett, you probably don’t want that to happen.  Conversations about money matters can begin as early as age 5 and lessons can go well beyond things like identifying the different coins and dollar bills.  For example, you can incorporate the concept of value by bartering with your kids.  If your child wants a new stuffed animal, ask her to “pay” for it by giving up one of her toys.  As kids grow older, the concepts you teach them will become more complex and if you need help, there are some great online tools to use as resources.  PNC Bank and Sesame Street have teamed up through PNC’s Grow Up Great Program to develop financial materials for really young children.  For older kids, ING Direct has created Planet Orange at www.orangekids.com.

What are some other easy ways to teach kids about money? 
Every time we engage in a financial transaction, it automatically becomes a teaching moment, so don’t let any of these opportunities escape your attention.  When you go to the ATM, explain to your kids that this is not a source of free money, but instead you are actually taking money out of your account that you worked very hard to put there in the first place.  If you go to a restaurant, have your kids help you calculate the tip or give them money to pay the bill.  Not only will this sharpen their math skills, but it will also let them feel and see the money being paid.  Monthly utility bills also offer excellent learning opportunities as do mortgage or rent payments. Review each bill with your child and explain what you are paying for. Real world situations are the best teaching tools because they allow a parent to show the benefits and experience the consequences associated with money matters.

You have a really interesting concept called the “Family 401(k)” — can you tell us more about that? 
Most 401(k)s we have at work have a matching component to them.  You contribute a certain dollar amount and your employer kicks in a matching contribution.  I think this can be a great idea for kids too.  Many kids receive an allowance for doing chores, and they sometimes receive money as gifts on special occasions.  Why not have them start a savings account with you or at a bank?  For every dollar saved, match it with a certain percentage like 10 cents for every dollar, or whatever you can afford.  This will give kids a real incentive to save.  This can also be a great teaching tool for concepts such as earning interest and the benefits of compounding.

With some many families facing unemployment, foreclosures and other unhappy events, how do you share these hardships with your kids? 
It is very important to share with your kids information about negative events.  You don’t need to go into the specific details, but remember, kids have a sixth sense when it comes to the emotions of their parents.  Discuss things like losing your job and having to tighten the family budget. Having the conversation is critical because it can help to dispel a child’s fear and may make them feel more secure.  Being upfront about your situation can sometimes create positive learning opportunities. For example, children may have their own suggestions on how they can step up in responsibility and help out.  Many children appreciate being able to help their parents by being involved.

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