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Financial skills need to be learned

July 07, 2006|by LYNN F. LITTLE

Money skills are some of the most important skills young adults need when they head out on their own. And they can't be learned in a two-week crash course right after graduation.

From preschool age on, children and teens are learning attitudes about money. At the same time, they can be learning skills such as:

· coin identification and making change.

· comparison shopping.

· saving for a special purchase.

· managing checking accounts.

· using credit cards wisely.

It's never too early and it's never too late to help children build the money skills they'll need in life.

Below are money skills and concepts for children, preschool to preteens. Some of them are so basic you might take them for granted, but no child is born knowing these things. Start today to create opportunities for children to see these money concepts and skills in action. Just telling a young child is not enough - it is important to give him or her many chances to observe and talk about transactions and events in real life.

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Money skills for ages 3 to 5:

· Identify coins by correct names.

· Identify dollar bills.

· Keep money in a safe place.

· We trade money for things.

· We can't buy everything, so we make choices.

· When we spend money, it is gone.

Money skills for ages 6 to 8:

· Learn coin values and equivalents.

· Count coins.

· Banks keep money safe until we need it.

· Writing checks takes money out of the bank.

· Deposit money in a savings account.

· Manage a small allowance.

Money skills for ages 9 to 11:

· Make change.

· Divide allowance between spending, sharing and saving.

· Make simple spending plan for one to two weeks.

· Keep simple spending records.

· Compare prices when shopping.

· Realize we can earn money by doing extra jobs.

· Save small amounts each week for larger expenses in the future.

· Understand and use correct terms for banking transactions.

It is natural for parents to pay attention to financial skills as teens are preparing to leave home. However, children begin as toddlers to learn about money, why it is important and how it should be used. Efforts to help children build financial skills will be most effective if they begin early.

Allow your children to observe your decisions. Families make dozens of financial decisions each week. It is not necessary (nor possible) to explain every single decision you make. It is, however, helpful for parents and others to get in a regular habit of talking with children about why they make decisions. Examples: "I chose this more-expensive sweater instead of the other one because this one is machine-washable." "I bought 20 of these notebooks because they were very inexpensive, and we'll use them during the year."

Try to let children observe or be involved in decisions that are appropriate to their age. Young children will be overwhelmed by complex decisions, but older children and teens need the experience of weighing the importance of various pros and cons.

It is appropriate to tell children about decisions you were unhappy with, as well as ones that pleased you. If they see that you learn from your mistakes (and your successes), they will learn to do that, too. Avoid sharing information in a way that causes your child to feel guilty or insecure about the family's finances.

Give children chances to practice. From grade school on up, children benefit from opportunities to practice making financial decisions. Two types of practice are particularly helpful:

Managing regular income

Children can receive regular, predictable income through allowances or payment for chores. When income is predictable, children can plan ahead to meet their needs and wants, using skills similar to those they'll need as adults. Be sure there is clear understanding about what expenses the allowance or pay is intended to cover, and then let them be responsible for meeting those needs.

Managing special sums for special project

Allow a certain amount of money for a particular project - such as redecorating a room, planning a birthday party or buying back-to-school clothes. Spell out any expectations you have and stay involved enough so that you can remind the child of important considerations they might forget, but then let the child be responsible for the ultimate decisions.

Give children opportunities to observe and practice financial decision-making throughout their lives. They'll develop skills and clarify their values, and they will learn to see money as a tool they can control in order to have what is most important to them in life.




Lynn F. Little is a family and consumer sciences educator with Maryland Cooperative Extension in Washington County.

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