Montana State University

Bad financial habits can start very early in children

April 14, 2004

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Kids today have more money to spend and can develop bad financial habits at a very young age that last a lifetime, says a Montana State University-Bozeman Extension family economics specialist.

"The life-long benefits of teaching children to save and develop good money habits make it well worth the effort," adds Marsha A. Goetting. Several programs are underway in Montana during April to help children develop such habits, says Goetting. Governor Judy Martz declared April as Teach Children to Save Month in Montana.

Martz' proclamation urges all citizens to recognize that personal financial responsibility and the well-being of the emerging generation is essential to Montana's future.

According to the American Savings Education Council, only seven percent of parents say their child understands financial matters. Thirty percent of youth report that their parents rarely or never discuss saving and investing with them.

Goetting says that educators around the country are trying to make people aware that children learn good money management by parents' examples, so parents sharing how and why their family tries to save will emphasize the importance of savings.

In addition, parents can have their small children separate coins into piles by color and size and discuss their value. Another important discussion can include an explaination of the difference between wants and needs. A simple example could be the difference between a child wanting a specific toy but needing a new pair of shoes first.

Parents can make children's savings visible by having them put their money in a piggy bank or clear jar. "Some parents agree to match the child's savings to visibly increase the pile in the jar more quickly," Goetting says.

Once the bank is full, children may open their own savings accounts at a bank, savings and loan association or credit union. Parents should encourage them to make regular deposits, she adds. Some financial institutions offer kids' clubs and send members newsletters or provide balloons or other prizes when children make deposits.

Goetting says saving up for a purchase will help them make choices between the many things that they want. For instance, if they are saving for a favorite toy, have them cut out a picture of it to glue to the savings jar.

"Better they learn from their mistakes when the dollar amount is small than later when mistakes are more costly," Goetting says. "Taking money out of their own savings will help them gain an appreciation for the things they buy when they have saved for a period and are using their own money."

MSU Extension has a web site with additional ideas on teaching children to save. Check it out at http://www.montana.edu/extensionecon/family/teachsaves.html.

Contact: Marsha Goetting (406) 994-5695