“My nine-year old son is always asking me for the latest video game, shoes, or DVD, with no thought about the cost of these things. I know I spoiled him when he was younger by buying too many toys and clothes for him. Now I’m worried that he’ll grow up without a clue how to manage money and live within his means. What can I do to teach him about money?”

Just like many adults, today’s children are riding high on the massive wave of consumerism that’s taking over our society. It’s easy for them to succumb to peer pressure and feel that they are not ‘with it’ if they don’t have the latest gear- Heelies, Crocs, Motorola flip phone, Playstation Portable, IPod, and more.

What can parents do to combat all these negative spending influences? Our challenge as care-givers is to substitute positive values that teach children about money – how to earn it, keep it, and make it grow.

To be successful in re-programming our kids, we must first be good role models by practicing successful money management too.

You can start your kids on the road to being wealthy, well-adjusted adults by imparting the practical values inherent in the money rules below. This week we will look at three key laws which will show children what money is really worth. Next week we will look at rules to teach them exactly what to do with the money they have.

1.  Money is earned

Many times, children don’t see the connection between work and money. They see their parents heading to the ATM, where by magic, money appears; and they receive gifts upon demand without having to expend any energy to get it. You can change this by having a family discussion about working to earn money.

If they are old enough, show your children your pay slip and your budget. Explain to them how each dollar you earn goes towards expenses or saving for the future. Let them make the link between your long hours at the office and the money that they wish to spend frivolously.

Encourage their entrepreneurial spirit by helping them to look for opportunities to earn extra money. One client recounted when she was only six years old, in response to her father’s talks about making money, she tried to sell oranges to her friends at school for profit.

When she realized that her schoolmates were not interested in the whole oranges, she had the bright idea to sell them in quarters. This time she was successful, and actually made more money than she would have if she had sold them whole. Today, she is still involved in entrepreneurial ventures, thanks to her early money programming.

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2.  Money can multiply

Hand in hand with a discussion about working for money, should be a lesson about money working for you. Explain to your children that they can earn interest (more money) when they put away some of their money in the bank.

An easy way to do this is to have them save coins in a piggy bank and when it’s full, match their savings by giving them ‘interest’. Open bank or credit union accounts as soon as they have accumulated enough savings and let them keep their bank books so that they can see the interest being added to their accounts.

You can download a savings calculator at www.financiallysmartonline.com, which your children can use to play around with different savings amounts, interest rates and time periods to see how fast their money can grow.

You can explain that this is called the magic of compounding. The value being taught is that there is a reward when you defer spending and instead choose to invest. By putting away a little of what you had planned to spend now, you will have much more to enjoy in the future.

3.   Money should be shared

Heavy consumerism brings a ‘me-first’ attitude in our children, where they are only concerned with all the goodies they want. Encourage an early spirit of philanthropy by asking them to donate a toy or item of clothing for every new one they receive.

Have them actually take their donations to a children’s home where they can give them to the less fortunate children. Help them to realize how lucky they are and how to be content with what they already have.

Read stories of the good works of wealthy people like Oprah Winfrey and Bill Gates, and our own Jamaican philanthropists such as Ferdinand Mahfood, who have made a big difference in the lives of many people around the world. This will also help them to understand that we all have a duty to assist each other in society.

Copyright © 2007 Cherryl Hanson Simpson. No reproduction without written consent.

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Originally published in The Daily Observer, May 10, 2007

Cherryl is a financial columnist, consultant and coach. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl