Money Matters: Raising Money Smart Kids by Janet Bodnar

It's the time of year, with holiday bills still coming in, taxes not far ahead, not to mention the market going down like a deflating party balloon, that money is on the minds of us grownups more than we'd like.

But how about our kids? Do they have a grasp on the concept of cash flow? Janet Bodnar's much hailed Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them (Kiplinger's Personal Finance) takes on those money matters--the thorny issues of teaching kids to respect, spend, save, and ultimately earn money sensibly. Bodnar, who writes Kiplinger's "Money Smart Kids" column, begins with a tough test for parents, "Test Your Money Smarts." Here's a sample:

Your 14-year-old son has been saving half of his allowance and mony earned from neighborhood jobs. Now he wants to use the money to buy an expensive iPod. You
1. allow him to buy it.
2. offer him your old turntable instead.
3. tell him there's no way he can touch his savings.
4. buy it for him as a birthday gift.

Managing money is admittedly an intimate and subjective business. Bodnar does a good job of balancing parental needs and perogatives against the need for children to have the real-life, hands-on experience of spending, earning, and saving money before they go out on their own. Many of Bodnar's principals are not hard and fast; she advocates using personal judgment regarding your family's financial needs and goals and assessing the money style of your child as well as your own in fashioning your rules. She does have some strong beliefs, however. Advances on allowances are a No-No. Payment for good grades is unwise. Credit cards for children and teens are a BAD idea, except perhaps for rechargeable debit cards for college students away from home.

Bodnar believes that the main purpose of children's allowances is to teach them how to manage their money, how to save it for special purchases, how to resist impulse buying, how to shop for the maximum bang for the buck. She's no spoilsport. She believes in allowing children to spend their money in their own way (provided their purchases are safe) to inculcate the desire to work and to save for a reward and to let them learn from their early mistakes how to avoid big ones later. For example, here are her five things 10-year-olds should know about their own money:

1. They will have to pay for their own movie tickets, snacks, and other expenses (except for school lunches) out of their allowance.
2. They will not get an advance on their allowances.
3. They should be able to navigate a grocery store with a list and bag a bargain or two.
4. They should have a savings account in a real bank--and they should understand that although they can withdraw money, it won't be the same cash and coins they put in.
5. They will not get everything they ask for.

Bodnar threads her way through the pitfalls of allowances, 'tween and teen status symbol purchases, home chores (paid and unpaid), savings, interest, and investment, neighborhood jobs, early teen work, late teen and college student independence (almost), dealing with divorced parents and doting grandparents, and boomerang graduates who move back in after college--all with both common sense and a sense of humor. Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them (Kiplinger's Personal Finance) has been called "the best resource for parents trying to raise kids with the ability to cope financially and succeed in our society."

One of the best nonfiction books for kids themselves is Neale S. Godfrey's Ultimate Kids' Money Book, which snappily covers all the money basics, from barter to stocks and bonds in a colorful, kid-pleasing format, well illustrated with humorous cartoons and plenty of "sticky-note" info-bits that summarize and nail down the concepts covered on each page. Explanations of complex ideas such as supply and demand, banking and business plans, inflation and recession are delivered in scenarios which are familiar to elementary and middle school readers. A four-page glossary reinforces the vocabulary developed in the text and an excellent index makes the book usable for casual readers or report writers alike.

For younger readers there are many picture books which deal with money management. For the youngest readers, there's Rosemary Wells' wonderful Bunny Money (Picture Puffins) in which big sister Ruby's wallet, fat with saved-up money for Grandma's birthday present, grows progressively thinner as Max picks out candy-filled vampire teeth for Grandma, drips syrup all over himself, and has to have his clothes washed at the laundromat (at Ruby's expense) before they finally settle on affordable gifts for the birthday girl. Wells provides endpapers with copyable "bunny bucks," humorously depicting rabbit versions of celebrities as diverse as Desmond Tutu and Julia Child, so that children can print their own medium of exchange to practice their bunnynomics.

For slightly older kids Judith's Viorst's classic spendthrift story, Alexander, Who Used to Be Rich Last Sunday shows her favorite fall guy Alexander (yes, that Alexander) frittering away the money his grandparents give him on their Sunday visit. Alexander is absolutely going to save his money for a walkie-talkie, except that impulse purchases (a one-eyed bear and a used candle) and sheer mishap with his money (down the toilet and into cracks) reduce his pocket change to bus tokens--again!

For beginning readers, Lillian Hoban's Arthur's Funny Money (I Can Read Book 2) "does the math" with Arthur and little sister Violet as they try to open their own sidewalk business. At Accelerated Reader level 3.1, this "I Can Read" book gives the early independent reader a chance to get a good giggle and an education in basic economics at the same time.