Helping youngsters get beyond the tooth fairy

The father and his five-year-old son were bicycling home from the ice cream parlor awhile back. Out of his allowance, the boy had treated both of them to a warm afternoon's snack. ``You know, Dad,'' the boy said. ``There are two ways you can make money.''

``Oh?'' replied the father. As a financial planner, Dad thought he knew something about making money, but he was eager to hear the wisdom of youth. ``What are they?''

``First, you can pick up your room,'' was the boy's first moneymaking idea. ``Second, you can wait for the tooth fairy.''

That experience, says George Barbee, the father in this tale, showed him just how far his son had come in his understanding of money and how one came to have more of it. Unfortunately, he adds, that attitude isn't so distant from the way many adults see things.

``People seem to think you can work for it or you can hope for it,'' notes Mr. Barbee, president of the Consumer Financial Institute in Newton, Mass. ``But the answer is discipline and setting priorities.''

That's the same answer a lot of parents, educators, financial planners, and other experts want to put across to children. With so much to learn about money, so many ways to spend it, and so much pressure from friends, family, and the media to spend it on this or that, the lessons about money need to begin early.

``Children begin to see very early that money can buy nice things,'' says Grace W. Weinstein, a financial writer and author of the recently revised ``Children and Money, A Parents' Guide'' (New American Library, New York, $8.95).

``By the time they're 3 or 4, they've seen money changing hands. At this age, it's not too early to begin to share some of the decisionmaking about money -- why the large economy size is more economical, why one cereal is better than another.''

Lessons like these, Ms. Weinstein and others say, can go far to getting kids started on track with the right attitude about money.

In some homes, the lessons come as circumstances arise. If a son or daughter wants some extra money for a new toy or a trip with friends, the handout is often accompanied by a gentle lesson on the virtues of saving for special occasions. Sometimes the lessons take hold; sometimes they don't.

In other families the lessons are more formal. Such is so in the home of Jerald Mason, an assistant professor of family sciences at Brigham Young University. Dr. Mason and his wife are the parents of six children, and they have worked out some procedures on how the children and the family spend their money.

One of those procedures involves an annual budget review, with the whole family participating. ``We look at where the money is coming from and where we think it's going to go,'' Mason says. ``We try to end up with some surplus.''

That surplus, he says, becomes the basis for a voting system whereby each family member gets to rank several alternatives from 1 to 3 for spending. The alternatives might include a vacation in California, a closer and cheaper vacation in Arizona, a redecorated room, new furniture, or a new stereo. The choices that get the most votes are put at the top of the list of family priorities.

This accomplishes three things, Mason says. First, the children see that there's only so much money and it has to be allocated fairly. Second, the fact that everybody gets to vote illustrates the value of democracy and fairness. Third, the ranking system almost always ensures that some money is spent on everyone's first or second choice.

The Masons involve the children in other ways, with sometimes unexpected results. Once, various children were appointed ``energy monitors,'' charged with making sure lights were switched off when no one was in the room or that dripping faucets were shut off. (That experiment ended when the bathroom lights were turned off with the hall switch while Dr. Mason was in the shower.)

In some families, Ms. Weinstein says, children help with the bill-paying. They get a stack of bills every month and they get to see how much is in the checking account. They are told how much should be left in the account when the bills are paid and then put to work. They can even write out the checks, though the parents still have to sign them, she cautions.

In another family, the parents try to see to it that $1,500 to $2,000 is left at the end of the year for charity. Each of the parents and the four children are given $100 to donate to the cause they select, then the family decides as a group where to put the rest. This exercise teaches the value of the dollar, but it also helps put money in perspective, the father says, while getting the children used to the idea of making regular charitable donations.

One of the hardest things for many parents to deal with is the influence of television. Some of TV's slickest ads quickly push the latest toys and games -- zap! -- onto children's ``I want'' lists. In many families, the best way to raise discriminating consumers is to give them some time in the school of hard knocks.

``Put the monkey on the kids' backs,'' Mason recommends. ``Make them responsible for how they spend their allowances.'' If a child spends his own money on a toy that doesn't perform the way it did on TV or one that breaks after the first day of play, he learns fairly quickly that some toys are made better than others.

Parents should also take an active interest in what the children are watching. Even if some of the programs seem silly and pointless, stay around for the commercials. Ask the kids which ones show toys doing impossible feats, what they know about certain toys (they may already know what's junk and what will last), and which stores are likely to have better prices.

From toy stores to the stock market may seem like a big leap, but it's one that Wade J. Webster, a Cockeysville, Md., financial planner, believes kids can make. ``With my own kids, I tell them that many of the products they see every day -- McDonald's, Pepsi, the gas company, and the electric company -- are places you can invest,'' says Mr. Webster, the father of a 10-year-old and a 13-year-old.

To help keep their interest, he allocates part of their allowance toward saving and investing. Instead of giving them all their allowance, he gives them 80 percent to spend as they wish. The 20 percent balance goes into savings and is matched by Webster. Then, if the children save at least $10 a month (plus his matching $10) for a full year, he'll match the total savings.

Most of these savings go into mutual funds, which send out quarterly and annual reports, so the children can see how their money has grown -- or shrunk -- depending on the fund. Also, the fund (part of a tax-saving Uniform Gift to Minors Act account) is set up to pay out dividends and capital gains in cash, so the youngsters get some tangible reward from their saving habits. Usually these proceeds are reinvested.

After parents and television, one of the strongest influences on children's attitudes about money is the schools. Often with the help of universities and corporations in the area, several schools are trying to build on the knowledge of money that children bring with them.

``Most children come to school with a basic understanding of funds,'' says Samuel G. Sava, executive director of the National Association of Elementary School Principals. ``By the time they reach kindergarten, they recognize money and what it can do.''

Schools can take advantage of this quickly, he points out. ``In math programs, we find when money is used in teaching addition and subtraction, it makes the point a little faster.'' The lessons can be put to a more practical use in special programs, Dr. Sava notes, like a fund-raising project or school store.

A fairly complex version of the school store has been installed at the Holland School in Minneapolis, says Steven Hanson, a teacher there. Children in Grades 4 through 6 spend part of their days in a school ``factory,'' where they complete production of such items as wooden toys, silk-screened T-shirts, or school mementos.

For their work, the children are paid in ``Holland Money,'' which can be used in the school store. Here, they can buy products from the factory, as well as school supplies and treats. Holland Money is also used to pay children who work in the store and in the school ``bank.''

At the Lincoln Fundamental School, also in Minneapolis (where generous corporate support helps keep a variey of programs like this going), pupils take turns working in a school restaurant, says Janet Clemetson, a home economics teacher. They apply for jobs just as adults would, fill out time cards, and report to supervisors. Later, the restaurant is turned into a store.

Both the restaurant and store are used to teach principles of handling change, bookkeeping, product selection, and price comparison, Ms. Clemetson says.

It's possible for parents to put to much emphasis on the lessons about money, Ms. Weinstein concludes. ``I wouldn't overdo it. Avoid heavy-handed lectures.''