Start early in teaching youngsters how to be smarter consumers

By Steve Rosen
Knight Ridder News Service

If you show your kids how television commercials try to entice them into buying products they might not really need, you could turn them into smart consumers.

All it requires is a small investment of your time to prepare your son or daughter for dealing with a lifetime of financial challenges. Here are some small steps that could get them going in the right direction in 2004:

• Introduce an allowance.

As soon as your kids start saying "I want," introduce them to money by giving them an allowance.

Should it be tied to chores? No, because I don't believe there should be any financial inducement to helping around the house.

Once you settle on an allowance strategy, don't miss a payment date, and evaluate the plan every year.

Older kids with an allowance might benefit by managing a larger sum each month to cover clothing purchases and other expenses.

• Clip coupons.

Take younger children to the grocery store and show them how to compare prices. Hand them the coupons as you roll through the aisles. At the checkout, let your child hand over the money and count the change. If there's a young teenager in your house, let him or her write the check as a way to learn the payment system.

• Collect the 50 state quarters.

The U.S. Mint program reached the halfway point in 2003. A new state quarter is released about every 10 weeks. For more information, go to www.usmint.gov.

• Invest in the stock market.

This is a good way to teach how to save for the long term and how to stomach risk. Low-cost options make it relatively easy to get started. You can buy stocks through www.sharebuilder.com for $4 a trade. You also can buy shares directly from companies through dividend reinvestment plans.

For more information, visit www.netstockdirect.com. Also, the Mutual Fund Education Alliance in Kansas City, Mo., has a list at www.mfea.com that includes low initial minimum investments.

• Help cut through the marketing hype.

When watching TV together, explain the messages behind the ads. Are the products really as cool as they look? Are there alternative products? What are the differences in prices?

• Save money for college.

If your youngster earns money from baby-sitting or lawn-mowing jobs, for example, set aside part of it in a college savings fund. It's never too early to start.

• Go slow on plastic.

Don't be in a hurry to turn your teen loose with a credit or debit card until he or she has mastered handling cold, hard cash. A good first step would be to open a checking account for the teen. This can teach budgeting principles and might cut down on discretionary purchases since the teen's money — not yours — is on the line.

• Resist spending pressure.

Whether it's the latest, greatest toy action figure, a cell phone or the stretch limo for spring prom, kids are always dreaming and lobbying for what may go beyond the bounds of your pocketbook. Talk with your child about the spending choices that are being made. Listen to their desires; gather their input. Then don't be afraid to say no. It's all part of the process of learning good money management habits.