It's
never too early or too late to introduce everyday financial concepts to a young
person. And, you don't have to be a financial expert. Here are tips from FDIC
Consumer News to help parents, guardians and caregivers show a child — from a
preschooler to a college kid — why and how to become responsible with money.
Engage
in regular conversations about money-related topics: That includes discussing
with your child what you are doing, and why, when you manage money at home,
around town or with the bank. For example, consider talking about similar
products that have noticeably different prices at a store, and how you decide
what is a good deal. And, you can explain that having a savings account at a
bank has advantages such as income from interest, peace of mind of knowing the
money will be there when you need it, and FDIC deposit insurance coverage for
each customer up to at least $250,000 if the bank fails.
"If
you are using plastic to pay for purchases, consider explaining the difference
between a debit card, which is like writing an electronic check, and a credit
card, which requires the consumer to make a payment in the future," said
Luke W. Reynolds, Chief of the FDIC's Outreach and Program Development Section.
For more information about credit and debit cards, see the Summer 2012 FDIC
Consumer News.
Even
with automatic transfers, such as direct deposit of your pay, consider using
your bank statements to show how money can move in or out of your account.
And,
special times of the year — like during tax time or your workplace's "open
season" for selecting health insurance — present opportunities to explain
financial decisions.
Consider
giving an allowance as a teaching tool. It can be a positive way to teach kids,
even those who are preschool age, about money management. But before you give
the first allowance, help your child decide how much he or she will spend now
and how much to save for future goals. Then, help your youngster see whether
that target is being reached by looking at a bank statement online or a paper
copy. Also talk through the tradeoffs involved with spending decisions, such as
how buying one toy may mean forgoing the opportunity to purchase another item
the child also wants.
"There
are many approaches to how best to structure an allowance, particularly whether
to tie it to work such as household chores, so each family will need to decide
what is best for them," Reynolds added.
Think
twice before giving a child more money if he or she runs out of funds before
the next allowance payment. That's because part of the purpose of an allowance
is to teach savings skills, self-control and the benefits of waiting to enjoy a
bigger reward.
And,
for younger kids, consider paying an allowance in smaller denominations to make
it easier to learn counting and saving skills.
Help
your kids develop a healthy skepticism of advertising and unsolicited
inquiries: In general, teach children how to analyze advertisements; they need
to know that "special offers" often are not the great deal they
appear to be.
Even
young consumers are targets for identity thieves and among the victims of scams
and rip-offs. Information for parents on protecting children's personal
information from identity theft is available at OnGuardOnline.gov.
The
next articles offer specific tips for different grade ranges. (Some of the tips
may be helpful for slightly older or younger kids.) And for a list of resources
for parents and caregivers, see How to Learn More.
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