Kids and Money

When the topic of kids and money comes up, some parents become defensive. How do you teach your children the value of money? Your actions are teaching your children what you believe about money, whether you think they’re paying attention or not. They are learning from what they are watching you do.

As parents, we have a lot of responsibility for teaching our children about life. We teach them morals and the difference between right and wrong. We set examples of what a family, maybe a marriage, is all about. We teach them to get up and go to school every day. What about kids and money?

If your children see you clipping coupons, visiting yard sales and reviewing sales fliers, they will absorb the idea that money doesn’t grow on trees and that it needs to be budgeted. These money-saving activities are things you can involve your children in from a very young age.

Many parents use an allowance as a method of teaching children about money. Experts have different opinions about whether an allowance should be something that is given to a child for the sole purpose of learning how to choose what to spend money on, or whether it should be earned for performing household chores.

The problem with attaching chores to an allowance is it encourages a child to expect to be paid for helping out around the house. Most experts believe that being expected to do chores and receiving an allowance for the purpose of learning money management should be treated separately.

An allowance is an excellent way to begin teaching children about budgeting. Children need to pay attention to where their money goes. Schedule a weekly time to give an allowance, so that it is predictable, like a payday. Some parents teach their children to budget their allowance to cover lunch money or clothing. Encourage your child to keep a record of exactly where their allowance is being spent.

Designate a portion of the allowance to be deposited to a savings account and begin a lifelong habit of saving. One way to encourage the savings habit is to give a five-dollar allowance as five one dollar bills and encourage your child to take one dollar a week and deposit it to his or her savings account.

How much money should a child receive as an allowance? If it’s too small, your child won’t be able to make choices. If it’s too large, he or she will be frivolous. A rule of thumb is an allowance should be equal to a child’s age, so an eight-year-old would receive eight dollars a week.

Don’t be afraid to tell your children when there are financial difficulties. If you are not honest with your children about your financial limitations, they will grow up believing money is available in unlimited supply. Teach that it is something to be worked for, earned and budgeted.

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