Piggybank Basics

Eat your vegetables. Wash your hands. Always say "please" and "thank you." We are full of advice for our children, but when it comes to money, we often have little to say. As a result, our children may grow up with clean hands and good manners, but without the foggiest idea how to handle their finances.

Here are some basics that will help guide them their entire lives:

Show them the future.

If your 13-year-old were to sock away $1000, invest it at 8% (a reasonable return for a good long-term investment) and add $100 every month, by the time she's 65, she would have $980,983! Show your youngster how it works with an online calculator such as the one at www.dinkytown.com - click on "Savings Calculator."

Be careful of credit.

Credit cards can help you make necessary purchases and build a credit history, but they must be used responsibly, which means paying off your debt promptly. Explain to your children that when you buy something using a credit card, you can easily wind up paying two or three times what you would have paid if you used cash.

Teach patience.

Suppose your youngster wants a new bicycle that costs $150. Rather than shelling out the cash or passing over the Visa card, give him a regular allowance and explain that by putting aside, say, $15 each week, he will be able to buy it for himself in only ten weeks.

Provide incentive.

Reinforce the importance of saving. "For every dollar he or she agrees to save and invest rather than spend, you agree to add another dollar to the pot," says financial planner Cathy Pareto.

Explain your values.

Values and money are deeply intertwined, says psychotherapist Eileen Gallo, co-author of The Financially Intelligent Parent. When your child clamours to have you buy something, explain why you really don't want to make that purchase. "You might say, e??'d rather save that money for your education,'" advises Gallo. Every time you spend or don't spend money, you have an opportunity to share your values.