Making sense of money

Money makes the world go round, yet the best things in life are free. A penny saved is a penny earned, but you get what you pay for. Kids get conflicting messages about money — and as the current economic situation proves, they’re not the only ones left baffled. Now’s a great time to teach your kids some financial smarts. You don’t have to try explaining subprime mortgages and defaulted loans, of course, but you can help your children learn rich lessons about nickels and dimes and buying and borrowing. They may even gain some valuable insights into such abstractions as, well, value. As you’ll see, our lessons about moola are disguised as cool games and easy family strategies, which makes using them one investment that’s sure to pay off.

Children: Start saving as soon as possible

Nick Callesen, of Callesen and Associates, an investment firm in Manistee, said it’s good to start exposing kids to money as soon as possible.

“With my own kids, we started very early,” he said “The earlier the better.”

Callesen’s children — Mason, 12, and Rachel, 8 — got started choosing their own stocks with an investment account when they were around 5 or 6 years old.

With a little help from dad, of course.

“It doesn’t take long for them to get interested,” Callesen said. “After a few years, they really took an active interest.”

Since his firm is primarily involved with investments, Callesen prefers opening an investment account for a child rather than a savings account. That way, the kids can interact with the money. Even with a mutual fund, a parent can show their child how it fluctuates.

Then there’s the good old allowance. Callesen’s kids have to donate 10 percent of their allowance to their church and another 10 percent to stocks.

“It’s an important lesson to teach them to give and to invest,” he said.

One way to teach kids the value of a buck is to give them an envelope of money — allowance in a lump sum — that the child has to make last.

“It teaches them to budget for what they want,” Callesen said.

Teaching kids to be responsible with money is only one of the goals, though.

“In having my kids actively involved, it’s helped them become more entrepreneurially-minded,” Callesen said.

Worthwhile investment: Let’s Talk About Money

From the Moonjar folks, who sell a popular spend-save-share bank for kids, comes Conversations to Go: The Game That Questions Money, a collection of conversation-starters full of financial provocation. The game offers a mix of nuts-and-bolts problems (“How much do you think it costs to have a dog for one year?”) and more philosophical inquiries (“Does money buy happiness? How long does it last?”). During a lively dinnertable conversation prompted by the game’s queries, Ben, my 11-year-old son, mused aloud about the time he spent $5 to fill a small bag with colorful stones, only to have them lose their emotional luster by the time he got home. “I think the fun of picking the stones might have been worth $2, but not $5,” he concluded. My 7-year-old, contemplating greed, recalled the story of King Midas and shuddered (moonjar.com, $15).

Savvy strategy: Members of the Bank of Mom

When tweens Gavin and Kieran Hambrose began getting a weekly allowance, their mom, Kathleen, created an allowance account to solve cash flow problems. “I never seemed to have the cash on hand to give it to them each week,” she explains. “And when we were out shopping, and they wanted to spend some of their own money, they didn’t have it with them or know how much they had to spend.” Now, in her purse, Kathleen keeps a small notebook in which she records a running balance for each child, tracking deposits (allowance and birthday gifts) and deductions (expenses and purchases). “Sometimes the boys save up to buy something big like a new Xbox game, and sometimes they use it for little things like a pack of gum. In the cashless society we live in, the account teaches them how to budget.”

Fun with finances: Home shopping

With a $2 budget, Anna Curtis, age 9, can get a handful of raisins for $1.75 and still have enough left over for five pretzels — at Mom’s Snack Bar, that is. Since her three children were little, Mary Ann Curtis has filled a muffin tin with individually priced nibbles and let her kids pick out — and pay for with borrowed coins — their healthy snacks of choice. When the store was still a start-up, the money math was easy: “A strawberry was three cents, so if they got two of them, they simply had to add up and count out six cents,” Mary Ann explains. But over the years, the sums have gotten more complicated. For an extra challenge, sometimes Anna’s older brothers run the snack bar, and then the prices get really exorbitant. Mary Ann says, “Grapes might be $62, so we get out the Monopoly money for that!”

Fun with finances: Raising Savvy Savers

“We have this joke in our family that we don’t want to move the same money around in a circle,” explains Cathy Herbst about why her kids don’t get an allowance. “It doesn’t help us if it’s just moving from our pockets to their pockets. We want to get more money coming in!” One solution was to put Calvin, now 12, in charge of clipping coupons. The incentive? He gets to keep half of whatever money the family saves, whether it’s 50 cents on laundry detergent or 50 dollars on a theme-park admission. “Of course it has to be stuff we actually use and need,” Cathy says, laughing. “In the beginning, we got a lot of ‘We need more cinnamon rolls!’ But now the arrangement works really well. It saves us money, gives Calvin money, and teaches him how to be a smart shopper.”

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Posted by Tribune News Services

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