11:43 AM

Teaching kids to save money now pays big dividends in the future

We all know that money is important in our lives, and it will eventually be that way for our children. The more they can understand about managing their personal finances, the better off they will be. They will have to face decisions about making retirement accounts, mortgages, auto loans, credit cards and an array of other finance-related matters. We don't want them ill-informed and making bad decisions.

Yet studies show financial literacy is appalling low in society. Despite required financial literacy classes in schools and educational programs offered by credit unions and other groups, financial literacy remains low. What's a parent to do?

There is a commercial on TV right now that shows a father taking his empty coffee can and putting a piece of tape on it with the words, "new mitt." And then he and his son put their pocket change in it as they save up for that new baseball mitt the son wants. Then, when the mitt is purchased, the tape is changed and they begin saving for a new item, and then later, another item. The last scene shows the son as a grown man. He takes his empty coffee can and puts a piece of tape on it that says "new mitt." He learned a lesson from his father about saving to get the things he needed in life, and he passes that lesson to his own son.

Talking about finances to a child is about as interesting to them as watching wet paint dry. But kids like doing things. The father in the commercial got his son involved in the process without the lecture. Carefully getting kids involved in the process of managing money is the key to teaching them about managing money. One of my most vivid memories as a child is going in the local bank every three months with one of my parents to have the interest in my savings book recorded for that little 10-dollar savings account they opened for me. Not only was I fascinated by this Fort Knox-like building we entered, but I could not believe that these people would actually pay me money to keep my money safe for me. Saving was fun.

How do you get your child involved? It's easy. Do you need to make a deposit this week or get money from an ATM? Take your child along and let him help. He can hand your deposit to the teller or push the ATM buttons for you. Do you have a bill you can pay in person rather than by mail or online? Take your child with you and let her hand your check and payment stub to the person who collects them. This experience will almost certainly generate questions. Why are we here? Who are these people? In answering those questions, your child will observe you saving for the future, and paying your current bills. It will be a lifetime lesson.

Grady Perdue is a professor of finance at University of Houston-Clear Lake and also holds the Certified Financial Planner professional designation. His teaching and research interests are in personal finance and investments. He is also a member of the JSC Federal Credit Union Board of Directors.