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How To Ensure Financial Futures By Teaching Your Child About Money

Kelly Fish of Calabasas, Calif., looked for a way to handle her then 9-year-old daughter, who each time she headed into a shop, believed she could have whatever she wanted from the shelves. Fish, a mother of two young children, met a woman with a plan when she came across Money Mama while searching for a solution to her frustrating problem – one experienced by moms in shopping malls everywhere.

"I didn't want to be a 'mean' mom, so I gave in most of the time to avoid a scene in the store," Fish says.

The creative mom behind the Money Mama moniker is Lori Mackey, an entrepreneurial wife and mother of two. As the founder of Prosperity4Kids, she helps parents empower their children to create healthy financial futures by offering educational products and information. To that end, she created the Money Mama Piggy Bank program.

"When I found out about Lori's program, I thought this could be the answer to my parenting prayers," Fish says.

The Birth of Money Mama

Four years ago, Mackey's personal experiences with her own husband and children jump-started the idea for her company, based in Agoura, Calif. At that time, she was attending business, financial and tax-related seminars to learn the secrets behind financial wealth.

"My husband and I always were great at making money, but we were not taught what to do with it," Mackey says. "I wanted to take all the information I learned and teach my own children what positive money management was and teach it in the simplest form possible.

"But when I went in search of these items there was none to be found. The books by-passed their age, the piggy banks only taught them how to save and spend and the chore charts only worked with stars and tokens, which had no motivation for my children."

Mackey's son was then in kindergarten and her daughter in third grade. Her son was a "spender"; give him $5 and he would spend $6. Her daughter was on the other extreme; she was a "saver," and didn't like spending her own money. "I realized the best method of learning for kids of this age was through games and visual and experiential learning," she says.

To make up for what she couldn't find, Mackey wrote an entertaining story for her children that explained the importance of why they should give, invest, save and spend wisely. The book is called Money Mama & The Three Little Pigs (P4K Publishing, 2003).

Mackey continued her quest to educate her children about money by purchasing one large piggy bank and three little ones to explain to them the 10/10/10/70 principle, a concept that has been around for hundreds of years, she says. Using the simple formula, for every dollar a child earns, they give 10 percent to a charity of their choice, invest 10 percent to build their fortunes, save 10 percent for their future and spend 70 percent for everyday expenses.

Mackey herself became aware of the concept by researching some of the country's wealthiest individuals. "Just about everyone I researched follows these same principles," she says.

What started as four piggy banks is today one handmade, ceramic Money Mama Piggy Bank, used by children to practice the wealth-building concept. "Once I showed my children how to follow this with the piggy bank and explained to my kids why [they should do it] through my book, it clicked for them," Mackey says.

The Money Mama program helped neutralize her children's bad habits and gave them a positive head start on money management, she says. "My son has become a very wise consumer," she says. "He always uses the concepts in the book." First, he pays himself the 20 percent for investing and saving. "He's very proud of his savings account," says Mackey. "He is a spender and most of the time spends his 70 percent, but most important he loves to pay himself and does not feel he has less."

Mackey's daughter still saves too, but in a healthier way. She "is very comfortable spending it on the things she really wants," Mackey says. "She loves watching her money grow in the bank and always saves and invests beyond the 10 percent. They both have more in the bank at 8 and 11 than I had at the age of 18."

Start Teaching Kids Early

Many people grow up not knowing how important it is to manage money, says Lance Helfert, president of West Coast Asset Management Inc. in Ventura, Calif. "They are amazed by their first paycheck, but it is even more amazing how quickly they spend it," Helfert says. "The earlier children are taught about saving and investing, the better. After all, the extra years they spend with their head start can mean a lot in the long run. With compound interest, the difference can be staggering."

Mackey also advocates teaching children about money as soon as possible. "It is much easier to teach a child from the beginning what to do with money than it is to teach a teen and even harder to teach an adult," Mackey says. "As we all know, bad habits are hard to break."

The Fish family found the Money Mama program easy to follow, and it helped their daughter make her own financial choices. "Putting a dollar a day away was the start of a whole new financial attitude for my daughter," Fish says. "She wanted to make money because it was her own, and I no longer had to say, 'No, you can't have this.' I simply said, 'Yes, you can have whatever you want with the money you have earned through chores, etc.' She realized maybe she really didn't need that plastic toy that would be lost in a week!"

Fish's 2-year-old daughter is already observing her mother put money in the piggy bank and she enjoys the accompanying book. "I know she is learning something that will put her a step ahead of the game," Fish says.

Mackey places the same importance of teaching children about money on teaching them about safety issues. "We teach our kids to swim, to not talk to strangers and to not put things in their mouths as soon as we feel they comprehend what we are saying," Mackey says. "Talking to kids about money is also a safety issue. In fact, if children grow up spending all of their money, then they will most likely live paycheck to paycheck no matter how much money they earn.

"The key to wealth is not how much you make; it is how much you save. We have grown away from saving money in our buy-now, pay-later society. But with the national debt, personal debt and bankruptcies at an all-time high, people are realizing how important financial literacy really is," she says.

Tips for Financial Learning Success

Mackey places being consistent first on her list of advice for parents who want to instill good money values in their children.

"I've learned that my daughters will have such an incredible advantage with their futures knowing how to make smart money choices," says Fish. "To give back to a cause they believe in empowers them to really feel they do make a difference and to save for their futures."

Next, keep a positive attitude when you discuss money with your children, Mackey says. "Sometimes we have a tendency to talk bad about money when we do not have as much as we like to have," Mackey says. "Never say in front of your children that money is 'dirty,' 'filthy' or 'only for the wealthy.' Money is a piece of paper; it has no feeling and is not picky with who has it."

Showing your children to value money in their early years by giving them an allowance also is important to the process. "The best way for a child to value money is by having them spend their own money [for the items that they want]," Mackey says. "It is a known fact that our children will spend our money three times as fast as they will their own money."

Helfert advocates having children earn their own money. "If children want something they see at a store or on TV, make them pay for it with their own allowance," Helfert says. "They might even forget they wanted it, but if they still do, they will be pleased with themselves and their accomplishments."

Teaching your child to save their money also is vital to creating financially healthy children, say experts. "It is important that they learn to spend less than they earn, and avoid debt at all costs," Helfert says. "By saving their allowance over time, they will have more than enough for that toy they would otherwise have to beg for. It is important that they know that borrowing the money to buy the toy will put them in a position of debt."

Helfert also suggests setting up a fund for a child and promising to match the money they put into it. "This will not only encourage them to save, but it will ingrain the idea of saving as a smart thing to do," he says. "They will start to save the money they earn at an early age."

Another good idea is to give small shares of stock and start small funds for young children, Helfert says. As they grow older, they may then be encouraged to develop an interest in investing. "They will be pleased to see the small checks and dividends that they receive," he says.

Simply following the market and setting up fake portfolios also is a way to teach children about money. Parents also can get children excited about money by taking them to the bank, Helfert says. "Introducing kids to the idea of money and its management should be fun and interesting," he says.

For more information on Mackey's program, visit www.prosperity4kids.com.

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