Cents and Sensibility

Maybe you should ask them for an allowance.

Look at 'em over there, those kids in the photo to the right.

No wonder they're all smiley and happy. You'd be perky, too, if you belonged to a generation whose pocket change would sink the Titanic.

These guys have more annual income than some continents. More amazing, they even earn more than General Electric.

The take-home pay of the current generation of rug rats comes to $24 billion. With a "b."

General Electric, the most valuable company in the world, earned only $9 billion last year. May I please be allowed to join this generation?

Why, when I was growing up, my sister and I pulled weeds in the garden for a nickel an hour so we could save up enough to eat lunch once a week in the cafeteria after walking to school barefoot two miles in the snow every day - and that was just for summer school.

But these kids are flush. They are the babies of the baby boomers, themselves the wealthiest generation ever in America, probably the world.

And if their parents educate them well, these children will learn valuable knowledge and skills at an early age. Like that a CD isn't just a device that emits a vaguely musical noise capable of causing adults to immediately leave the room.

They will know that it is also a financial instrument whose yield exceeds that of a passbook savings account and has the same degree of safety but requires a longer-term fiscal commitment.

In other words, money that goes into a CD (certificate of deposit) is not used to buy a CD (compact disc) and vice versa.

If they don't know that, they should. That's the message from this first part of Guy Halverson's series on kids and money. It focuses primarily on pre-teens and the basic concepts of money management - teaching kids that money is a tool for achieving personal goals, not the object of frantic desire.

If they learn some basic, simple concepts, they can manage their generational wealth and learn when to say "no thanks" to the mavens of Madison Avenue.

And if they learn them now, they likely won't end up as an adult sitting across the desk from a debt counselor feeding their credit cards to a shredder.

Here's what Merrill Lynch, the giant investment house (which last year trailed the tots with $1.9 billion in earnings) discovered. Adults save more than other adults when, as kids or teenagers, they:

* Took courses in school on household finances.

* Had bank accounts.

* Owned investment securities.

* Received an allowance.

* Held a regular job.

* Communicated with their parents about financial matters.

* Had parents who saved.

Fairly impressive. As you'll see from Guy's articles, the trick is not to sit the child down and proceed to lecture her or him on the higher principles of low finance.

You work with them: Help make a budget for their allowance, figure out who pays for what, decide how much of the allowance goes for responsible purchases (school clothes) and how much goes for "mad money" (frivolous spending. You might consider that as a minor category in your own budget.).

The payoff for parents is a less needy offspring, plus the joy of imparting wisdom to a child and doing something with them, not at them.