Q: Our family overspends, and our 2013 resolution is to budget! Our kids are 15, 13 and 6. Are there materials to help teach them how to manage money better than their father and I do?
A: According to the Financial Educators Council, most parents don't talk to their kids about money because they don't feel they know enough to guide them. Yet learning good financial habits early helps young people avoid common mistakes, such as accumulating too much credit card debt. Young adults ages 20 to 25 make up the largest group filing personal bankruptcy, so helping your children become savings-savvy will give them a good foundation for money management.
While learning to budget is important, make financial literacy your goal, says Gail Karlitz, author of "Growing Money: A Complete Investing Guide for Kids" (Price Stern Sloan, 2010). "Financial literacy is knowing how money works," she says. "It's a set of skills to help you earn it, manage it, invest it to earn more money, spend it and donate it to help others."
Karlitz likes to use allowances to teach children to manage money. "Don't tie allowances to household chores -- those should be done without pay as part of being a member of the household," she says. Pick an amount you feel comfortable with. Many parents give a dollar a week per year of age.
With your family, discuss needs (food, clothes, housing), wants (treats, entertainment, things we like but aren't essential), goals (things we must save for, such as a new car) and giving (church collections, presents or charity), says Karlitz.
Explain to your kids that, as parents, you will take care of the family's needs while they are growing up. Have your two older children keep notebooks with sections for their needs, wants, goals and giving. List what they want to include in each and estimate how much of their allowance will go to it.
Involve your older children in a similar discussion of the whole family's needs, wants, goals and giving. The Jump$tart Coalition for Personal Financial Literacy has a simple online calculator called "reality check" to make this a fun learning exercise. Plug amounts into key expense categories to see the relationship between your spending and your income. The exercise will not only help your family create a framework for budgeting, it will give your teens a snapshot of what they have to earn to maintain the lifestyle they envision. (For more information, go to jumpstart.org/reality-check.html. Check the site's map for financial education programs in your area.)
Your 6-year-old can join in too. A new nonfiction series called "Smart Start: Money" (Red Chair Press, 2013) provides a good introduction to financial literacy. The four stories -- "Super-Smart Shopping," "Kids Making Money," "Saving for the Future" and "Sharing With Others" -- align nicely with the concepts your older kids will be discussing.
"Smart Start: Money" author Mattie Reynolds says, "Young children can easily grasp the concepts of earning, saving, spending and sharing money if they read about them in the context of their daily lives." (Go to redchairpress.com to find the four-book set.)
(Do you have a question about your child's education? Email it to Leanna@aplusadvice.com. Leanna Landsmann is an education writer who began her career as a classroom teacher. She has served on education commissions, visited classrooms in 49 states to observe best practices, and founded Principal for a Day in New York City.)