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Teaching children how to manage money
Friday, September 3, 2010; 10:01 AM
Some families watch TV after dinner. Others review white papers on economics.
Taking the idea of talking to the children about finances to unusual lengths, John Scanlon and his wife have rolled out papers such as "A Primer on the $1.4 Trillion Federal Budget Deficit" and "High Unemployment: The Recession's Harshest Reality."
Sure, their three older kids, who are 13, 11 and 8, would have preferred to watch TV, he said, but they asked questions and paid attention during the lessons.
"The kids love talking about money," said Scanlon, chief operating officer of Intersections, a company in Chantilly that provides identity protection services including credit monitoring and spyware zapping. "Why not have conversations that are constructive?"
Teaching youngsters how to manage money can be a feat, particularly now as Americans grapple with their shattered finances in the tough economy. Only 55 percent of Americans had a savings plan with specific goals in 2010, compared with 62 percent in 2008, according to the America Saves campaign and the American Savings Education Council, which surveyed 1,000 people in February.
That's bad news for our debt-mired country's future.
"You have to develop a measure of skill yourself in order to be able to model the behavior for your kids," said George Barany, director of financial education at the advocacy organization the Consumer Federation of America. "Young people who save successfully learn to do so at home."
So maybe the Scanlons are onto something. The older Scanlon children already have savings accounts at the McLean bank Capital One. The toddler and baby on the way will follow suit.
He thinks it's important to teach his family about money, he said, because he grew up in a rowhouse in Jersey City that didn't always have hot water. If his kids don't spend their weekly allowances, he gives them more as a reward. He expects them to give a portion to charity.
Scanlon has volunteered to teach financial literacy classes through Junior Achievement at their elementary school in Fairfax. The worldwide nonprofit organization offers programs to educate students about entrepreneurship, work readiness and financial literacy. It also puts out the reports that the Scanlons offer as after-dinner fare at home.
So how do parents who've struggled financially help their children turn into adults who are good with money?
"As hard as it is, you might have to be honest with the kids about your own financial struggles," said Laurie J. Blackburn, a certified financial planner and vice president in Wealth Management at McLaughlin Ryder Investments in Alexandria. She says children will sense it if the family is under financial stress. When you explain why you have to cut back on spending, she said, they'll have the chance to learn from your experiences.