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By Michael Kane
Smart Money
The Vancouver Sun
Monday, March 19, 2001
Teaching children about the value of money prepares
them for the future and removes the mystery and
myths often associated with financial markets,
fee-only investment advisor Adrian Mastracci
says.
Starting early is important because parental
influence begins to diminish when children become
teens.
"Those early lessons stick with them more than
we know," says Mastracci, president of Vancouver's
KCM Wealth Management.
In the early years, make it fun and start with
small doses. When the children learn basic arithmetic,
take them with you on the family shopping trips.
This begins the lesson on the art of compromise.
Mastracci says the average child receives upwards
of $300 per year in allowances, gifts or payment
for chores, more than enough to learn the value
of money.
When children are about five, consider splitting
up a weekly $1 allowance between a dark-coloured
"savings" jar and a see-through plastic "spending"
jar.
"You will find that children will save more money
if they cannot see the coins and they will likely
spend only the ones in the more visible spending
jar.
"Make no mistake about it: the goal is for the
children to spend money on items of their choice.
Dipping into the saving jar is also allowed -
just like in real life."
Mastracci suggests giving the allowance in quarters
so that over time lots of coins are places in
each. Keep a running tally and discuss the progress
every time you give an allowance.
The allowance should be paid at the same time
every week, such as after dinner every Monday
night.
"You will find that the child will be looking
forward to it and will not let you forget," says
the father of a five-year-old girl and a two-year-old
boy.
"If they want to buy something with their money,
let them, even if you disagree. Later, ask them
if they are happy with their purchase and discuss
the impact of that decision. It is all part of
making informed choices.
Let them know that when the allowance is spent,
there is no more until the next one. Mastracci
says children are fascinated with savings accounts.
They enjoy making deposits and watching their
savings grow, especially if they are saving for
a specific purpose.
Many institutions have savings accounts designed
specifically for children.
As an investment advisor, he observes that most
of us have an easier time taking someone else's
counsel after we have made enough mistakes on
our own. Children are the same.
"Do not link allowances with chores," he says.
"Always remind them that they receive an allowance
so that they learn of the value of money, not
for chores."
In later years, children should be involved in
family budget discussions.
"With your guidance, they could be involved
in the discussion of whether this is the year
to buy the new home computer or the skiing gear.
"Similarly, you can discuss whether you are going
to replace the automobile or take a longer vacation.
This approach makes them feel part of the process.
Not least, parents and grandparents should set
good examples.
"If you act prudently and responsibly, they,
too, will become prudent and responsible money
managers. You will be very proud at their accomplishments."
Mastracci maintains "Kids Money" on his Web site
at www.kcmweatlh.com.
Parents without Web access can call 739-4500
and ask for free copies of his newsletters on
children and money.
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