Kids & Money Raising Responsible Kids

Using an allowance to teach your child about money.

Some parents may disagree that giving a child an allowance can help them prepare for the day when they will be managing their own finances, but, if done right, an allowance will help them understand the concept of finances.

The wrong way to give an allowance.

My friend, Lisa, works hard. She gives her seven year old daughter five dollars a week. In return, she expects her child to keep her room clean and help around the house. I've never heard Lisa talk to her child about money. I have heard her berate her young daughter for mishandling money. This technique simply won't work. Her child needs to be taught - not admonished.

An allowance can be a great way to teach discipline and responsibility.

Teach your kids how to count money before starting an allowance. Make it a game. Spend a few minutes each week. Maybe you can dump your change out onto the counter while you are cooking dinner and have your child count it. If they get it right, tell them they did a good job. If they have trouble counting your change, encourage them. Assure them that they tried hard, and soon they will be able to do it. Encouragement goes a long way to building the confidence your child needs.

A child with confidence tends to work harder to meet their goals.

End the whining in the store.

I hate shopping with my friend, Lisa, and her daughter. Invariably, the daughter sees something she wants and demands it. Lisa says "no", and a fight breaks out. The daughter ends up whining and crying and occasionally treating us to a full blown temper tantrum. We all end up miserable.

I once suggested to Lisa that she teach her daughter money management. If she allowed her daughter to bring her allowance to the store, her daughter could learn how to spend her own money. Lisa just snorted and said that her daughter would never learn.

Lisa's right. Her daughter won't learn until someone takes the time to teach her - or until she grows up, moves out of the house and is forced to learn the hard way how to save and budget and understand how to make buying decisions. I would much rather have my child make wrong choices in spending a five or ten dollar allowance than have her grow up unable to resist spending simply because no one took the time to show her and encourage her.

Help Them Learn.

When my son was in high school, his allowance was enough to buy lunch at school and have spending money left over for other things. There were many Friday's that he went hungry because he had spent his allowance and didn't have enough left for Friday's lunch. Occasionally he missed lunch on Thursdays, too.

The good news is: he didn't starve to death. And he learned the value of money. He learned that if he didn't pay attention to what he was spending, he would have to make a sacrifice. As much as it bothered me at the time to let him go hungry when he spent his money, I am now proud that he handles money better than I do.

Let Them Earn Extra Money.

I always found ways for my son to earn extra money. Snow needed to be shoveled in the winter; grass needed to be mowed in the summer. Either chore would earn him an extra $10.

I also gave him incentives for saving. If he wanted a new bike, we would price it. Then I would tell him that if he saved 2/3 of the price, I would pay the balance. He became very conservative in his spending habits when he found that his goal was achievable and I was willing to help.

Let Them in on Family Budgeting.

As soon as they reach their teens, kids are able to understand and help with planning.

A trip to the grocery store can involve them in making lists and shopping within a budget. The biggest lesson they can learn here is "avoiding impulse buying."

For new appliances, teenagers can do the research and read reviews. Let them watch you negotiate with salesmen on the price.

Watch Them Save.

When you take the time to teach your child financial awareness, they will show you how well they catch on. Don't be surprised if you raise kids who manage their money better than you ever did.

Great Books For More Info:

Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them (Kiplinger's Personal Finance)

Raising Financially Fit Kids

Money Doesn't Grow On Trees: A Parent's Guide to Raising Financially Responsible Children

A Kid's Guide to Earning Money (Robbie Readers)

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Anonymous said...

When my friend's twins were small, they would often want to play with the same toy. Their Dad would then get out a quarter and let them choose "heads or tails". Whoever won the toss would get to play with the toy; the other one would get the quarter to save until he could buy a toy of his very own.

story teller said...

That's a good technique! Both kids would learn something.

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