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AN EARLY START ON MONEY MANAGEMENT

As the school year comes to an end, another class of seniors is launched into the "real world." Financial matters are a big part of that world. But the young people who will make the most successful transitions are those that have had good, solid training all along.

Children should receive training early so they have a strong foundation to build on, says Paul Richard, director of education for the National Center for Financial Education, a non-profit organization based in San Diego.A knowledge of basic money management principles not only gives young people greater confidence, security and peace of mind now, but it will make a difference in the lives they'll be living 20, 30 or 40 years down the road.

Here, says, Richard, are 10 ways to help children learn the value of money:

1. As soon as children can count, introduce them to money. Take an active role and regularly (repetition and observing others are the two methods most people learn by) communicate with children about your values, money and how to save it, make it grow, use it sensibly and most importantly, how to spend it wisely. Helping children also learn the difference between needs, wants and wishes prepares them for making good spending decisions in the future.

2. Explain the concept of earning interest income on saving. Consider paying interest on money saved at home. Have children help calculate the interest so they can learn how fast money accumulates through the magic power of compound interest. Later on, they will also realize that the quickest way to a good credit rating is a history of regular, successful savings accumulation.

3. When giving children an allowance or income, give the money in denominations that encourages saving. For example, if the amount is $5, give five $1 bills and encourage at least one be set aside in savings. (Just saving $5 a week at 6 percent interest compounded quarterly will total about $266 in a year, $1,503 in five years and $3,527 in 10 years.)

Also, introduce U.S. Savings Bonds to children. They are still a good value, cost one-half the face value, earn interest and in some instances, will be tax-free if used for college education.

Most people tend to spend what they earn, so increased income is not the answer to increased savings. Beginning the regular savings habit early is one of the keys to savings success.

4. Going to the grocery store is usually one of a child's first spending experiences. About a third of our take-home pay is spent for grocery and household items. Spending smarter at the grocery store, coupled with using coupons, can save more than $1,800 a year for a family of four.

To help young people understand this lesson, demonstrate how to plan a meal, how to use planned leftovers and before actually going to the store, checking to see what items are on sale, what could yield a coupon savings, etc. Encourage the use of lists, coupons, checking store ads and comparing prices weekly. Show also how to shop by unit price.

5. Take children with you to other stores. Explain how to plan purchases in advance and make unit price comparisons and how to check for value, quantity, quality, etc. Spending money can be fun and very productive, when spending is planned. If unplanned, however, usually 20 to 30 percent of our money is wasted because we obtain poor value with many purchases.

6. Allow young people to make spending decisions, both good and poor. Encourage a discussion of pros and cons before more spending takes place. Encourage them to employ common sense when buying. That means thinking twice before making major purchases, waiting for the right time to buy, and employing the spending-by-choice techniques - which is selecting at least three other things money could be spent on, and then deciding this is really what you want before making the purchase.

7. Show children how to evaluate ads on TV, radio and in print. Will the product really do what the commercials say? Is it really a sale price? Are there alternative products available that will do a better job, perhaps for less cost? Just because something looks expensive, doesn't meat it represents the best value. Remind them of the old adage that if something sounds too good to be true, it usually is.

8. Look into joining a credit union, if you are not a member already. Most usually have a good youth program that encourages savings and reinforces what you teach at home about money. Explain to young people about the advantages of member-owned-and-operated credit unions, such as higher savings interest paid, lower borrowing costs, etc. This is why more than 57 million Americans belong to them.

9. Alert children to the dangers of borrowing and paying interest. Charge interest on small loans you make to them so they will learn quickly how expensive it is to rent someone else's money. (After all, that is really what credit is all about, renting another's money for a specified period of time.)

For instance, paying for a $499 TV over 18 months, at $31.85 a month and 18.8 percent interest, means the TV really costs about $575. Saving $31.85 a month at 6 percent interest would total about $620. Pay $499 cash for the TV, and $121 would still be in savings.

10. Establish a regular schedule for discussing finances, spending, how to economize at home, how to get by without spending or by spending less, etc. This is especially helpful for younger children. It could also be a time when they count their savings, get paid interest and watch it grow before their eyes.

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(Additional information)

10 financial commandments for young people

Starting out right is an important part of ending up where you want to be. Loren Dunton, president of the National Center for Financial Education, offers these guidelines for young people who are establishing their financial identity and just entering the marketplace.

1. Thou shall NOT put out more money than is taken in.

2. Thou shall spend money thinking of your future as well as your present.

3. Thou shall remember that compound interest is never retroactive.

4. Thou shall NOT collect credit cards or use them carelessly.

5. Thou shall honor always thy debts and obligations.

6. Thou shall develop a spending plan and spend money also on savings and investments.

7. Thou shall always search for high interest rates and a good return.

8. Thou shall live moderately today and not worship the god of materialism.

9. Thou shall practice dollar-cost-averaging in your investing. (Establish a set dollar amount each month for investments instead of purchasing a set number of units. This means you will pay a lower cost per share as the market fluctuates. When the price is up, you'll buy less; when the price is low, you'll buy more.)

10. Thou shall obtain a financial education so as to be no one's fool.

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Books, learning tools designed to give kids some financial savvy

Several books and learning tools are available to parents and teachers through the National Center for Financial Education, a San Diego-based non-profit group. They are designed to help teach children the concepts of money accumulation and management, financial planning and economics.

To order, send a money order or check to NCFE, Children's Money Books, P.O. Box 34070, San Diego, CA 92163-0740.

-"Money Management for Children," in a three-book set geared to young people in grades three through seven. The set includes a Personal Money Book, where skills and values of money are explained; a Family Money Book, which helps children understand about household and family expenses; and a Money Manager Book, which helps with day-to-day planning for their wants, wishes and needs. The set is $5 plus $1.65 book rate or $2.40 priority mail.

-"How to Understand Economics in 1 hour," by economist Marshall Payn, is written and illustrated so children and adults can grasp the concept of economics and how it differs from personal finances. $4 plus 90 cents book rate or $1.45 for first-class mail.

-"About your future...Financial Planning will make a difference," by Loren Dunston, helps motivate young people to save and invest early. $11.95 plus $1.25 book rate or $2.40 priority mail.

-"The DOLLARPLAN Spending & Savings Techniques for the 1990s," a home-study course that covers net worth, goal setting, spending, developing a spending plan, becoming a regular saver, all about credit unions and banks, insurance, estate planning, etc. $14 plusl $1.65 book rate or $2.40 priority mail.

-"The REWARD game," is a model of our national economy, complete with inflationary and recessionary cycles. Players buy, sell and trade assets with other players in order to become financially independent. $30 plus $4 postage and insurance.