Your children
don’t understand this concept. At the word ‘budget’
they simply stare at you blankly. All they see is that
you go to the store pull out your wallet and walk out
with stuff. They have no concept of where the money comes
from or that you can’t just buy whatever you please,
whenever you please. So how do you teach them this important
lesson?
Well, many financial experts will tell you that an
allowance is the very best way to teach children all
about money management and the earlier you start the
better. So once you’ve decided that an allowance
is a good idea, the questions then become how much,
does age factor in and what will your children have
to do to earn this allowance?
The biggest mistake parents make is implementing an
allowance too late. They usually start at twelve or
thirteen and by that time, kids are like sponges, largely
influenced by commercials and their friends. Budgeting
their money pales in comparison to owning the latest
hot brand of sneakers that everyone at school is wearing.
So the key is starting young, usually once you start
noticing that every time they go shopping with they
start pulling things off the shelves and looking at
you with that look. When you notice these moments occurring
with more frequency it’s time to sit and have
the ‘money’ talk. Around the age of five
or six is a good time to start the ‘allowance’
ball rolling. You can sit them down and inform them
that every week, they can have a certain amount of money
to pay for the things they want.
A good indicator of how much to give your child is
to decide what you think your child is most likely to
spend that money on. A five year old will probably want
to buy candy or small toys. Let them know that this
money is the only money they will be getting from your
for things the don’t ‘need’ like food
and clothing and occasional gifts. If they want something
that costs a little more, well they will simply have
to learn how to save up.
Explain to them about how you make money by working
or if you’re a stay at home mom, by working together
with daddy to keep house and take care of them. You
make money to buy the things you need and to pay the
bills and if you want something nice for yourself, you
have to save money or you won’t be able to afford
it.
When they come shopping with you, they can use their
money to buy things, but only things they can afford.
If they want something that costs more, they are not
allowed to ask you to make up the difference. For a
small child, a dollar every week will usually allow
them for the little things they would buy and help them
start to save up for things that cost a little more.
Even if the child loses the dollar, which is likely
to happen at that age, it’s important not to give
them another one until the agreed upon day of the next
week. This will teach them responsibility.
Once they reach the age of nine or ten, if they’ve
proven they can be responsible with money, it would
be reasonable to raise their allowance to five dollars
and with each passing year, raising the amount by a
dollar would be fair.
Once they reach their teen years, relatives might sometimes
give them monetary gifts. In keeping with the intent
of a gift, this is their money. However, it should be
doled out in the same amount as their allowance. So
instead of five dollars a week, they get ten. However,
they should understand that this will only last as long
as the monetary gift lasts. Once they’ve spent
their gift money, their allowance goes back to the initial
amount. This will cause them to think twice about going
through the money faster, just because they’re
getting more. In fact, if they know the bonus money
won’t last, they’re more likely to save
it towards the purchase of something they really truly
want as opposed to an impulse item.
So once you decided how much you want to give them,
you have to think about how you will have your child
‘earn’ their allowance.
Depending on their age, how they earn their allowance
will be different. The tasks that a six year old can
complete will obviously be different than the ways in
which a tween or even teenager can earn their allowance.
For a younger child, you can make a deal with them to
help out around the house, completing little tasks like
helping you with laundry or clearing the table after
dinner or feeding the family pet.
An older child can compete more difficult tasks like
bathing a family pet or taking out the garbage every
night or doing the laundry, perhaps even preparing some
of the family meals if they’ve demonstrated an
aptitude in that area.
You can work in education as a part of their allowance
earnings by having good grades be another incentive.
The most important thing is to be consistent with both
the amount given every week and the chores they have
to complete to earn the money. You’ll find that
as they mature, the lessons you’ve instilled will
help them make informed choices not only with money
but the sense of responsibility will spill over into
other areas of their lives as well…leaving them
less likely to go bankrupt at thirty and move back in
with you.
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