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Allen Ostrofe: Seven habits of great financial parenting

Most of us entrust much of our children’s day to state educators and are confident they will be schooled in reading, writing, mathematics, history and geography.

But what about financial literacy? Graduating students from high school and college without a basic understanding of how to use money and credit responsibly is like giving a new car to someone who has never completed a course in driver’s ed!

Rising to the challenge are parents who are enabling children to discover their own responsible relationship to money. These parents share seven highly successful habits:



• Pay an allowance. Jointly, with children, compile a written “job description.” The relationship between responsibility and reward introduces the lesson of accountability.

• Build a budget. Find forms online by googling “budget.” Identify even the smallest source of income. Track every expense with your child. This is an important step to not spend more than they have.




• Build a credit score. Many young adults are surprised when they apply for home credit and are turned down because they have no credit history. Some parents start their children with a secured credit card, in which a fixed amount is deposited with the card vendor. This earns interest, but is not used for payments unless there is a default. A young person can use such a card to build a good credit history while staying within financial limits.

• Share costs. Many parents mistakenly believe they are helping their children when they pay for certain expenses, luxuries or when they get into a bind. But instead, they may be teaching their children where they can go when they get into the next financial bind.

If your child wishes to have a Wii or a car, suggest a plan whereby they contribute. The value of money, in their eyes, just went up.

• Curb abusive spending. Driving has speed limits. Prudent parents instill in their children similar warnings against spending beyond their means. These parents provide financial freedom – with written consequences for children who violate the rules.

For example, “If I spend beyond my limit in a month, I will do the following to repay my family…”

• Save constructively. Savvy parents teach their children that they, not the government, are responsible for their financial futures. Offering to match dollar-for-dollar the savings going into a child’s account or IRA can help nurture a financial nest egg from which they will be able to draw responsibly.

• Charitable contributions. We cannot look to our government to provide all the services we value as a community. Let’s train our children to be active community members.

Encourage children to make contributions (time or money) to local charities and nonprofit organizations. The child should personally experience walking into the organization of their interest, sitting down with a member to understand the group’s purpose and contribute their time or money at a level important to the child.

Be a great financial parent. Enable your child to make their own financial decisions.

Allen Ostrofe is president of Ostrofe Financial Consultants Inc. in Grass Valley. He can be reached at (530) 273-4425, or allen.ostrofe@natplan.com.


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