Publication : Kiplinger's Personal Finance
Date : 07/11/2006

Financial education in the schools is spotty at best, and even when kids do learn about consumer finance, they don't take it seriously. A friend of mine tells me that, at his daughter's school, the kids look down on classes in consumer education as "math for dummies" who aren't up to geometry or trigonometry.

That's a shame. But it's all the more reason for parents to take the lead in helping kids learn the six things every child needs to know about money before leaving for college:

• How to manage a cash allowance. No school lecture or computer program teaches kids how to set priorities and make spending decisions better than having to get by on ten bucks a week.

• How to manage a checking account (and an ATM or debit card). Every teenager should have an account, and know how to balance it -- preferably as soon as he or she gets a part-time job. (Co-sign or open a custodial account if your child is under 18.)

• How to save for a goal. It's tough enough for anyone to be thrifty just because it's a virtuous thing to do. Kids need a reason not to spend their money, whether it's saving up to buy an action figure or their first car. To give them an incentive, consider matching all or part of what they put aside.

• How fast money grows. To show kids how quickly they can get rich, let them plug numbers into a compounding calculator (see the "Savings Rocks" page at OrangeKids.com, which also has a child-friendly explanation of compound interest).

• How long it takes to get out of debt. Say you put $50 a month toward a $2,000 balance on a credit card charging 18% interest. It will take you 62 months to pay off the balance - and cost you $1,077 in interest.

• How to compare prices. Start small with unit pricing at the grocery store and build up to comparing prices at Abercrombie versus Old Navy, for example.