When it comes to money matters, many grown-ups are afraid to ask questions. Others are paralyzed by the fear of making mistakes.
We might prevent our children from falling into the same trap if we help them develop a healthy attitude toward asking questions, making decisions and correcting mistakes. Here are suggestions on how to begin:
* Let your children listen in on fact-finding or problem-fixing conversations. Knowing that a grown-up asks questions about interest rates at the local bank or corrects errors on a phone bill or broker's statement will encourage children to seek answers. It also demonstrates that it is OK to admit that you don't understand something.
* Begin to familiarize your children with financial jargon (such as interest, dividends, gains, losses, stocks, bonds, mutual funds, savings accounts, etc.) Not knowing the meaning of financial words can be inhibiting to anyone, regardless of age. Go slowly -- too much too soon can be overwhelming.
* Make finances a weekly family project. Look up one or two stocks in the newspaper, monitor changes over time and track the price fluctuations. This way, even the youngest child can get a sense of market changes, risk and reward. To make it more fun for your children, allow them to choose stocks of companies whose products they know -- such as Coca Cola, Pepsi Cola, McDonald's, Disney, etc.
* Acquaint them with your own family budget. Take $1,000 of play money in small bills, and explaining each expense, divvy up the stack as you go. For example, out of every $1,000 you earn, subtract the following expenses: $250 taxes; $200 housing; $120 food; $100 transportation; $100 emergency money/savings; $50 insurance; $50 utilities; $50 clothing; $40 medical; and $30 for entertainment.
Explain to your children that what is left -- $10 -- is your "discretionary" money for miscellaneous expenses and, yes, for their weekly allowances.
* Encourage your children to do comparison shopping on major purchases (such as sports equipment, bikes, clothes, etc.) Aside from real money savings, they will have a better understanding of the broad range of prices that different stores or brands charge.
* Encourage charity. To instill a sense of social responsibility, encourage your youngsters to put away a small amount of their earnings or weekly allowance to be given to the less fortunate. Let them choose the charity.
Above all, remember: There is no such thing as a stupid question! Parents can help children develop a positive attitude toward solving problems by showing them that asking questions is a good thing. Add to this familiarizing children with simple financial concepts and encouraging good habits, and they will be well on their way to a healthy self-image, confidence and a sense of adventure.
Susan Bondy founded her namesake financial services company 1980 to provide financial planning and asset management. She is a frequent guest on "Good Morning America," the "Today" show and National Public Radio. She is the author of "How to Make Money Using Other People's Money." Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore 21278. All letters will be treated confidentially.