Money woes? What to tell the kids

Many company founders say that having entrepreneurial parents of their own provided plenty of inspiration for them -- which they, in turn, want to pass along to their own kids. Peanut Butter & Co. founder Lee Zalben says he remembers hearing stories about his grandmother's catering firm and how his parents worked the bar and the coat check to help her out.

"I came from a middle-class background and certainly wasn't born with a silver spoon in my mouth," he says. "I was always taught the importance of bootstrapping and how it's really all about hard work."

Look beyond allowances

Besides handing your teens a weekly or a monthly allowance, encourage them to generate their own earnings. Many successful entrepreneurs got their start at ice cream shops, movie theaters and local stores, and credit much of their early confidence, self-reliance and teamwork skills to their first experiences as employees.

"If times are tough and Mom and Dad don't have as much money to spend on their kids, maybe that's a great time to encourage them to get a job at a local restaurant, a movie theater, a craft store, hopefully something that their child has some kind of interest in," says Zalben, who worked a slew of jobs for pocket money starting at age 12.

"I knew a lot of kids whose parents wouldn't let them work because they wanted them to focus more on their studies. But I don't think any of those kids spent any more time studying than I did. I just had to have better time management."

If adding to your child's already arduous academic load is a serious concern, seasonal jobs during school holidays can train kids to spread out a larger chunk of money across a full calendar year.

Once a teenager enters college, he or she can be responsible for budgeting money for day-to-day expenses. Henderson says that he agrees to match any amount of money that his daughters save from part-time jobs and thus double their budget for college spending money. He cut his daughters a similar deal when they were saving up to buy their first cars.

Practice smart saving

There is no better time to teach the importance of smart saving than during a recession. Starting at a young age, kids should get used to the idea of allocating money for spending, saving and sharing.

Graumann uses an envelope system with his young kids at home. "Whether it's Grandma giving them $20 on their birthday or it's money they made selling lemonade, have kids put a percentage of that money in each of the envelopes," he says. "Then, when it comes time to go to the store and your child wants to buy something that's not on the grocery list, they can take their envelope for 'spending' with them."

Not only does this method help Graumann control what his kids can spend, but it also teaches them the value of holding on to some of their money, rather than spending it on a toy they will probably forget about in a few months.

"The hardest thing for kids to learn is the amount of time it really takes to save money," says Del Favero, noting that it's something he didn't learn for himself until he entered the work force. However, the earlier you can communicate to your kids the difficulty of saving long term, he says, the more likely they are to have success with saving in their future.

It's also important to get your kids involved in saving for their own futures. Sit down with your teenagers and devise a plan to save for their college fund; this will give them a sense of ownership for the family financials.

In the end, though, saving money shouldn't be only for selfish reasons. Make sure your kids are also setting aside money that they want to share. "It teaches them the importance of giving back to the community," Del Favero says.

This article was reported and written by Tamara Schweitzerand Laura Palotie for Inc.com.

Published April 24, 2008

< previous |  1 | 2 |