Teach Kids The Value Of A Dollar

Teaching kids how to save and spend money wisely can be a tough task, particularly if you struggle with finances yourself.

That's why The Early Show asked financial guru and radio host Dave Ramsey to help out.

"You can just be real with your kids," he advises co-anchor Rene Syler, "Just go: 'I'm not perfect at this either. But I'm going to make sure you learn more than I did.' So you could still engage the subject even though you don't feel totally adequate."

One of the most important principles children need to learn about money relates to learning how to work.

"I'm not talking about Hitler's boot camp for kids or something. But they do need to learn to work," Ramsey says. "Graduate from high school with something more than the ability to open a bag of Doritos and play Nintendo. That's a bad plan. Work creates money. I meet 54-year-olds that haven't got that one down."

The most common question he receives on the topic of kids and money is: Should I pay my child an allowance? Ramsey's answer is yes and no. He believes parents should give their children a "commission."

"Work - get paid; don't work - don't get paid. Everybody is on commission," Ramsey explains how he handles the subject in his family. "Try not coming to work for six weeks. Work gets paid; don't work, don't get paid. When they earn those dollars, and when you're 4, and you clean up your room, it really means mom cleaned up the room and you did two toys. When you're 14, it means you cleaned up your room. But still, we got the money caused by work, and then, we have teachable moments on how to handle the money they earn."
The difference between allowance and commission - considering a parent can withhold allowance if the children don't do their chores – is the word allowance, Ramsey says.

"Am I going to make allowance? Are you deficit somehow? No. They're not deficit. They got the ability to kill something and drag it home, just like mom and dad," he explains.

In addition to specific ideas for parents, he has a line of books designed just for kids. Three new books on shelves this month teach kids about debt, integrity and contentment. In "Financial Peace Jr." he stresses how to teach about giving, saving and spending their commissions. Ramsey suggests putting the money into three separate envelopes or glass jars. They should be marked "giving," "saving" and "spending."

Ramsey explains, "What happens is, when little Johnny or Susie gets paid, we break the money up. Put some in giving. That way they're giving money they earned. If I just hand my son a little bit of money as he heads into church, he's just a currier. He's not giving. And saving, then they can have some goals that they can save up for. Of course, spending. You buy Celebration Barbie a little bit different when you saved for it."

In the saving category, Ramsey encourages establishing long-term goals. He says, "Around our house we told our teenagers we're not buying cars. We've been blessed financially so we'll match what you save. So early on, they had to start saving for cars."

He notes children need to have a concrete goal and they need to be excited about it, otherwise they will not be eager to save their money.

Finally, if you are having trouble teaching your children that you are not made of money, Ramsey says, try saying "No" to them.

"I mean, "no" is a possible answer," Ramsey says. "Put your tongue toward the roof of your mouth, release air - "No." We have to teach our kids that. Some parents have never told their children that. We're in a very affluent society today. Just 'No' is an OK thing. I understand things you don't. I am older than you. I'm going to teach you with things like this. Today, the answer is just, 'No,' deal with it."