We emphasize the importance of giving to charity in our family, but my 12-year-old is donating all the money she gets from birthdays and babysitting. We're happy she's so generous, but have we created a problem in the other direction? How can we teach her it's OK to save a little for herself? --Lorrie B. Bloomington, Indiana
Congratulations on raising a daughter who values the importance of using her money to create a better world. My guess is that your daughter's "overgiving" tendencies won't last forever. She's probably feeling pressure to buy the latest fashions or gadgets, and those pressures will only increase as she enters her teens. (The American Psychological Association estimates that advertisers spend more than $12 billion a year on ads aimed at young people.)
But so many young adults end up in debt, in part because were not teaching them financial literacy when they're kids.
1. Talk to your daughter about what she'll need her money for when she's on her own -- college, a car, and smaller things such as music and clothes. Start with a modest savings goal, like $5 or $10 a month, and increase it as her income increases. Part of that money could go into a college fund, and part into a short-term savings account.
2. Talk to her about what it means to give consciously, which differs from giving everything (or nothing at all). Draw from your ethical, moral, and spiritual beliefs to guide the conversation. Mention that some people tithe, for instance, giving 10 percent of their income to charity, while others donate a set amount monthly or whenever they get unexpected funds, such as an income tax return. Conscious giving is less about a specific number and more about doing the best you can to help others while still honoring your own needs.
3. There is a way to simultaneously save and give: community investing. It's as simple as opening an account in a community investing bank or a credit union. The institution uses the funds to provide loans and other financial services to low-income people for things like affordable housing, a college education, or starting up a small business.
If your daughter was saddened by the suffering during Hurricane Katrina, she could open a checking account with Hope Community Credit Union, which would help the bank to provide low-interest loans to Katrina survivors. She could help improve child-care facilities in Durham, North Carolina, by opening a savings account with Self-Help Credit Union.
Visit the Community Investing Center to find institutions. Such accounts are federally insured, so you can feel comfortable that your daughter's nest egg will be safe. And most of these institutions send out regular newsletters about how they're using the money, so she'll see the good that results from her savings.