Teaching children to manage money.

• Position: Finance - Brief Article

Communicating with one's children is difficult for many parents, and talking about money is no exception. Furthermore, many parents are reluctant to talk about finances with their offspring because they hold the widespread view that personal finances should no more be talked about than sex.

Yet, perhaps one of the greatest gifts parents can give their kids--often far greater than outright gifts of money, according to the Financial Planning Association, Denver, Colo.--is to teach them financial life skills. Learning to manage money is fundamental in today's complex society and can give your offspring increased confidence and self-esteem. The benefits of this education accrue not just to children, but to their parents as well.

A reluctance to teach the value of money and discuss personal finances with your children can create real problems when it comes to estate planning. Experts say nothing breeds more animosity between heirs and their benefactors, as well as among heirs themselves, than keeping an estate plan secret. Families that have a history of discussing finances openly and teaching children the value of money will have much less difficulty communicating about the estate plan and making it one that works for all involved.

Another direct impact of the failure to teach children about money may occur when young adults return home to live because they haven't learned how to manage their own finances. Adults living at home can have a significant financial impact on their parents, who may stop saving for their own retirement or make other sacrifices in order to handle the added financial burden.

The key is to discuss and teach children about finances when they are young, perhaps by age four or five when they can count and differentiate coins. As they grow older, allowances provide a good avenue for helping them learn to save, spend, and give to charity. Use envelopes or jars where they can divide their cash into savings, spending, and charity. Explain shopping...