Ask Joan

Week of February 1, 2008 • Previous Question Archive

Ms. Sabella has managed MainStay Balanced Fund since its inception in 1989. She is a Managing Director and has been with NYLIM since 2000. Prior to that, she worked at Towneley Capital Management, Inc. for 22 years. Ms. Sabella is a member of the Financial Planning Association, Financial Women's Association, and the CFA Institute. She holds a B.B.A. from Baruch College, is a Certified Financial Planner, and is a Chartered Retirement Planning Counselor.

Got a question you'd like Joan to answer?Ask Joan Now

Q: Why do America's schools fail to teach our children about money: borrowing, investing, taxes, and insurance?

A: I agree that the lack of knowledge regarding finances is an increasing problem in America, but why just blame America’s schools? As parents, don’t you think we should share in the responsibility of teaching our children to be financially responsible adults? I do.

With that said, I believe that it’s never too early to start educating your children on the financial aspects of life. Children are capable of understanding much more than we think. Taking these simple steps can help you raise a financially responsible child who understands and appreciates the value of money.

Give Them an Allowance. Start by giving younger children an allowance in exchange for chores around the house (making their bed, clearing their plates, putting their toys away, etc.). As they get older, the chores they perform can involve more responsibility (cleaning their room, taking out the trash, washing dishes, folding laundry, etc).
Open a Savings Account. Establishing a savings account in their name will help them understand the concept of saving, how money can generate interest, and how money can accumulate and will allow them to buy something they really want in the future (the latest video game, an Ipod, a cell phone, designer clothes, etc.).
"Loan" Them Money. Unexpected expenses and needs come up — it’s part of life. When it does, offer to “loan” your child money (or advance them on their allowance) so they can purchase the item earlier (or when it’s on sale), go to the movies with friends, buy the latest gadget, etc. This can help them further understand the value of money and allow them to start making choices on how to spend their money.
Contribute to Their Expenses. You may also want to consider having older teens contribute to their expenses (cell phone bill, car insurance, movie tickets, etc). This will help them understand the financial pressures of being an adult and better prepare them for managing their own finances.
Set a Good Example. According to the U.S. Commerce Department, despite the fact that personal income increased 6.4% in 2006, personal savings rate for the average American declined to negative 1%. That’s the lowest it’s been since a negative 1.5% savings rate in 1933 during the Depression! If we can’t set a good example for our children, then what future do they have in store?

Here are some additional resources that can help you raise a financially responsible child:

This article is intended to provide general information only and is not intended to provide investment advice or any recommendation to buy, sell or hold securities. The content of this article is not appropriate for the purposes of making a decision to carry out a transaction or trade, nor does it provide any form of advice (investment, tax, legal) amounting to investment advice or make any recommendations regarding particular financial instruments, securities, investments or products. Any information herein has no regard to the specific investment objectives, financial situation, or particular needs of any specific investor, and investments discussed may not be suitable for all investors. Neither NYLIM nor New York life will be liable for any errors or inaccuracies in such content or any actions taken in reliance thereon. As a registered investment advisor, NYLIM may render investment advice for compensation only as permitted under applicable US and state law.

Questions will usually be answered within the next bi-weekly posting of Ask Joan. If a question is particularly involved, or the answer depends on the specific circumstances, it may be possible to give only a very general answer. In these cases, you will be advised to seek more specific advice.

Ask Joan

Q: Why do America's schools fail to teach our children about money: borrowing, investing, taxes, and insurance?

A: I agree that the lack of knowledge regarding finances is an increasing problem in America, but why just blame America’s schools? As parents, don’t you think we should share in the responsibility of teaching our children to be financially responsible adults? I do.

Be the first to Comment