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Tap inner child for financial success

All you really need to know about money management you learned as a kid. All you really need to know about money management you learned as a kid.

By HELEN HUNTLEY
Published December 10, 2006


Robert Pagliarini, author of The Six-Day Financial Makeover, suggested recently that you pick up most of the skills you need to manage money successfully by the time you reach age 8 or 9.

His theory: Qualities that are inherent in young children - like focus, flexibility and a willingness to work hard - translate into good money habits in adults. In reality, if we all relied on what came naturally to us as children, we probably wouldn't be in as much debt. We'd have padded savings accounts, and clear goals outlining what we want our money to do for us.

The truth is, Pagliarini points out, much of what you need to know about money, you knew instinctively before you hit the double-digits. You just forgot. Here's a primer to refreshing your memory.

- Focus on an objective. Children are great at this - they will work for hours trying to put a puzzle together, or build the perfect tower out of blocks. "As adults, we lose that focus. Most of us have all of these things we want to achieve - whether it's a great retirement, paying for college or a down payment on a house - but when it comes to saving for them, we just don't do it," Pagliarini says.

- Know your resources. Then align them with your passions. Children will make the best use of what they have at hand - heck, they are known for playing with gift wrap, toilet paper tubes, you name it. They make forts out of pillows and blankets, and instruments out of pots and pans. Take a cue from them - you may think you don't have any money left over each month to contribute to a 401(k) or an emergency fund. But you're looking at your income from the wrong angle; that is, after you've spent it.

- When you buy, do it for yourself. "Young children don't covet what their neighbor has - unless taught to do so," says Vivian Friedman, an associate professor in the Department of Child-Adolescent Psychiatry at University of Alabama at Birmingham. Adults, on the other hand, are more likely to feel the pressure to conform, and spend an awful lot of money living up to it.

- See the value in small sums. Again and again, people say, "I only have $50 a month to contribute to my retirement. It's not even worth it," or "My child is already 15 years old. It's too late to save anything for her college." Putting money away, no matter what amount, is always a good move, and one that children do very well. This is largely the appeal of piggy banks. "Children delight in small amounts," Friedman says.

- Learn to appreciate. Children are able to find enjoyment in just about everything. They love to do jobs around the house, while we complain that we have to go to work. They enjoy their first bank account, filling out deposit slips and going to the local branch. For us, that's a chore. They also take pure pleasure in the things they buy, no matter how small or inexpensive. We're always trying to one-up ourselves, and as a result, end up overspending time and time again. "Children are not ho-hum. They delight in what they buy with their money or what they get as gifts," Friedman says.