By Molly Mulvihill
Family Times is 20! To celebrate, we will pick one article from our archive each month including this one, which appeared in the April 2004 issue. View our other anniversary content here.
Not only do today’s children have more money to spend than previous generations, they develop spending patterns at an earlier age. What your children learn about money comes from the ideas, attitudes and spending habits they learn from you, their peers and the media.
An allowance is a great way to teach your children how to manage money responsibly. While there are differences of opinion on how much you should give and whether you should base it on good grades or doing chores, even a small allowance teaches children to manage cash based on their own needs, wants and goals.
Best of all, your children learn from their mistakes at an age when the consequences are less serious. For instance, if they spend money that they have earmarked for a weekend movie with friends, the greatest consequence they will face is that they may not be able to go to the movie. By contrast, if they later squander funds earmarked for tuition or rent, they could end up out of school or moving back home.
As soon as your children start asking about money and how things are bought and sold, they are ready to receive an allowance. Don’t be surprised if your 3-year-old shows an interest. Buy a piggy bank and use this opportunity to teach your younger children about saving.
Discuss an amount. Your 15-year-old should, of course, receive a larger allowance than your 7-year-old. Many parents budget $1 for every year of a child’s age ($10 for a 10-year-old), at least until the teen years. Then set a payment schedule with your family, and put it in writing to avoid any confusion.
Be clear on the terms of the allowance, if any. If all parties have agreed to tie the allowance to household chores, describe the chores in detail, as well as any consequences of not performing those tasks.
Help your children set up a spending and saving plan and suggest how the funds could be used more effectively. But once you give your children an allowance, allow them to control how it will be spent.
And pay the allowance on time. Show them you can manage your money, too.
Check out the full April issue below!