Financial literacy for youths. ... sounds sexy, no? Course not, but that shouldn't relegate it to rear of educational concerns.
Kids with cards
Nellie Mae, the higher education loan provider, conducted a credit card usage analysis in 2000. Of the 78 percent of undergraduates with credit cards, the average number of cards held was three.
Average credit card debt per student was $2,748, an increase of nearly $1,000 when compared to 1998 numbers.
"If they're taught they have a certain amount of money they can spend, then they learn as they grow older about saving," says Rosemary Lynch, a family and consumer sciences teacher at Martinsburg (W.Va.) South Middle School and Shepherd College adjunct professor.
"It's an important thing to teach them, rather than there is a limitless supply from Mom that they can get to whenever they need it."
So all those jokes about going to the Savings Bank of Mom/Dad? Not such a good idea in reality.
An easy trap parents slip into is losing track of when allowances are given and then opening their wallets at will when every new expense pops up.
Instead, keep track of how much children are spending and for what, including periodic allowance reviews to determine whether a raise is in order.
"I did this: You set up an allowance and it's a great idea for a week," Hunt says. "And maybe you keep it up for a month or two months and then it falls into disrepair."
This is where Hunt's Family Bank can come in handy. Developed last year, the software lets youngsters manage their own money, with controls established to encourage, even coax, good habits into forming.
A weekly allowance is recorded electronically, with a portion distributed into a savings account that accumulates interest. Younger children who want to withdraw money from their account must write a check, payable to cash, to their parents. Kids entering adolescence who are given their allowance each week must still record expenditures before receiving their next allowance.
If a child wants to save up for a bike, they can set aside money every week for that purchase. If they want more money above and beyond their weekly allotment, they can take out a loan - payable with interest, of course.
Built in allowance reviews let parent and child discuss the system in place, how money is being spent and whether an increase is in order.
"You set up the system, let the system work and relax," Hunt says. "Over time, your children will develop the habits you wish you'd had when you were young."
Even banks have rules
Whatever system parents settle on, Lynch says they must be strong about enforcing the rules of the game. No lessons will be learned if mom or dad relents after kids prod them for more dough.
Having to live within their allowance, children learn to balance needs - school lunch, gas money - with wants such as the hot new jacket everyone has.
In a back to school survey of 1,000 parents conducted last summer by Visa, 71 percent of respondents said ensuring students learn practical money skills before graduation was very important.
Seventy-eight percent of the 1,000 parents of kindergarten through college-aged children thought schools should be required to teach a class in money skills.
Of those parents who give allowances, elementary school students averaged $7.90 a week; children in middle school received $9.80; and high schoolers were given $17.20 per week on average.
Every family is different and allowances should be determined, Lynch says, based upon the family financial picture. Some schools of thought suggest paying out $1 per week per year of a child's age.
Where advocates differ is in whether allowances should be tied to household chores, with arguments pro and con carrying weight. Hunt says parents must be cautious about withholding an allowance as a form of punishment.
"This is about teaching children through experience how to manage money wisely," he says. "It should be what it is: A financial education method."
Regardless of how much is given, how often it is distributed, taking money matters seriously early on can prevent serious mismanagement in young adulthood.