Teaching your kids about money will pay off later

JULIE JANOVSKY, TRIBUNE


Young Matt Burns is learning to become a savvy entrepreneur.

He recently raked in close to $10 from the lemonade stand his mother, Meg, let him set up in front of their Fountain Hills home. The venture wasn’t just about netting a profit; she devised the lesson to teach her 7-year-old son about the value of money.

“Once he has money, he wants to spend it right away,” laments Burns, 29, who has had to find creative ways to encourage her son to save.

Many parents struggle to get across the message that their children need to spend and save responsibly. It often gets lost when a child, cash in hand from allowance or gifts, sees a must-have toy ... or watches parents regularly take out plastic to make a purchase. The concept of keeping money in the piggy bank goes out the window.

Experts say parents have to be disciplined and consistent in their approach.

“Kids need to learn it’s important to save. It’s a learned behavior. If you don’t teach kids to handle money at a young age, you will have to bail them out when they get older,” says Steve Economides, a Scottsdale resident and author of the book “America’s Cheapest Family Gets You Right on the Money.”

Spending and saving
Persuading Matt to save his weekly allowance — he typically earns up to $5 a week for doing chores — is an ongoing issue for Burns. For the last two years he has brought his wallet with him whenever they went, whether it’s to rent a movie or headed to a dollar store. “He will walk around and find something, whether it’s a gum-ball machine or Batman cards,” says Burns, who tries to counteract those impulse buys with a discussion in the store.

“If he wants to buy something, I have him explain why he wants it. He needs to have a good reason and explain why it’s important for him to spend money to get it,” she says. He also can’t go to the cashier without her permission.

But through the lemonade stand experience, the second-grader has a better understanding of the hard work that goes into making money.

“He understood it’s not free to set up a business,” says Burns, who had her son pay her back the $3 she invested in the lemonade, cups and poster-board to get his business running. She says they discussed the costs of supplies and how much he would have to sell to make a profit.

Early education
Steve Economides says it’s important to start teaching your children about money as early as they can understand.

“It’s not just giving them money to spend. You have to teach them to earn it, budget it and spend it,” adds his wife, Annette, who collaborated with him on their money-saving strategy book.

The Economideses speak from experience: They and their five children have had many a discussion on the value of saving.

“You have to give them opportunities to succeed and fail. Failure at (age) 8 is better to deal with than at age 18 when you see a $700 cell phone bill,” explains Steve, who says children need to learn their goals can be met one dollar at a time if they become good savers.

Burns says Matt initially wanted to spend most of his lemonade sale profits to buy a membership on a Web site that has games, but he changed his mind after she had him compare that potential purchase with one of his bigger goals: a trip to California to take part in a karate exhibition this summer. She says he has saved $21 of the $100 he needs to go.

“I have him think about the purchases he wants to make and compare it to what he wants,” she says. “I tell him there is a trade-off.”

It’s a lesson she hopes will stick.