Teaching children how to manage money

There's a bright side to these tough economic times.

Your children may be learning more about money than you did when you were younger.

A recession can prove an invaluable educational tool.

By experiencing at a younger age the impact of tough financial times on your family, your children will develop an appreciation for the almighty dollar.

This can go a long way toward both their economic and emotional well-being. After all, money is one of the chief reason couples fight, and a leading cause of divorce.

So why not take this opportunity for children to learn how to manage their money-before they reach that point?

Bad times could prove an excellent opportunity to take advantage of the power of love. Nearly everyone may need to go without some things they'd truly like to have.

But if children can view their sacrifices as acts of love in the interest of helping parents and siblings, those sacrifices can draw the family closer together.

Add a dose of basic financial education, and you can nearly guarantee that your children will have better financial lives than you.

How to start?

A family meeting may be the first step. Parents can include the children in a review of household income and expenses and brainstorm together how to save a few bucks.

Everyone may chip in ideas. It may mean renting DVDs at the public library rather than paying Blockbuster fees. Or, you might start shopping at thrift and consignment stores to find affordable, fashionable school clothing.

Possibly Junior will have to put off getting the Elmo Tickle Hands that his or her friend has. There may be tears. But crying can prove healthy release, and children are resilient.

Set some family goals about saving and spending.

Check weekly how far the crew has progressed.

Always start your child saving early. Allow your child withdraw the money, or you could risk discouraging savings. Of course, it doesn't hurt to help the child set spending priorities. Explain, for example, the long-term value of a college education compared with buying the hot toy of the moment.

Show your pre-school children that buying a specific breakfast cereal to get a couple of free gifts may be more expensive than buying the toy outright.

What about those two-for-one deals at the grocery store? Catch: The store raised the price of the item first. Or the item may be a loss leader to get you to buy more.

When shopping, encourage your child to comparison shop for the best values.

Pay your children an allowance for doing household chores. Then take him or her to open a savings account.

If you're using credit cards, teach how to verify charges. Explain how to calculate the tip in a restaurant and where to write it, and how to take safeguards against credit card fraud.

Explain how and when you plan to pay for the charge.

The Web site, http://life.family education.com/money-and-kids/money/47957.html breaks down goals for you to help your children attain based on their ages. For example, kids age 6 to 10 should learn the difference between a nickel and a quarter. They should learn to make change and be responsible for money.

Meanwhile 14 to 18 year olds should save for college, get a job, learn about investments, understand a budget, learn about credit and debit cards, and understand taxes.

Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Quick Steps to Financial Stability" (Que/Penguin). You can contact them at www.moneycouple.com.