Can you remember how you felt the first time you had your own money to spend? I recall feeling pretty proud and quite independent. As a mother, that's the way I want my own children to feel. My husband and I have made a point of giving our kids opportunities to learn to handle their own money from an early age.To me, one of the most effective ways is to start an allowance. With a regular allowance, kids have cash of their own to touch, experience and learn to value. And they begin to feel a little bit in control of their lives when they can make some of their own buying decisions.
But it's not as easy as just handing over a few dollars. There are a number of things to think about to make sure you're not just giving kids the ability to buy what they want, but also teaching them how to manage their money wisely.
WHEN TO START - WHAT TO GIVE
As soon as a child is old enough to say, "Mommy, I want that toy," you can introduce the idea of an allowance. You might be surprised at what a difference it makes when a child has to dig into his or her own pocket to buy something. All of a sudden, money has real value.
Some parents start an allowance as early as age 4; others wait until their kids are in elementary school. There are no hard and fast rules - a lot depends on your own child. The important element is to make the amount and the intervals that you give it appropriate to the age and developmental stage of your child.
Here are some things to consider before you set an amount:
- What will your kids need to buy with their allowances?
- Do you want them to earn their allowances by doing chores?
- What's the going rate where you live for kids of the same age?
The more you expect your kids to rely on their own money, the more they'll need. But as a general guideline you might give 6-to-8 year olds $2 to $3 a week, 9-to-11 year olds $5 to $7, and 12-to-14 year olds $7 to $15. Of course, these amounts depend on where you live and your own financial situation. They may seem high for some and low for others.
Your best bet might be talking to the parents of your kids' friends and schoolmates to find out what they give and expect in return. This may help you avoid complaints about friends receiving more or being responsible for less.
LETTING THEM FLY
As I said before, I feel an allowance is about independence. So as a parent, you need to let your kids make their own spending decisions as well as their own mistakes. Think of it as their first lesson in budgeting. If their allowance is supposed to cover school lunches for the week, snacks and extras like CDs or a movie, but they blow it all at once, don't come to the rescue with extra cash. Let them figure out how to cope by packing a lunch or giving up the snacks.
As your kids become older, you can encourage even better budgeting and money management skills by increasing the time between allowances. You can even add to the expenses you expect them to handle. For instance, give your teen a monthly allowance that's meant to cover some essentials like transportation or clothing, or discretionary expenses like entertainment - he or she will learn more quickly how to make the money stretch. The trick, and it can be a hard one for parents, is to let kids handle it themselves and don't always be there to fill in the gaps.
INTRODUCING SAVING AND GIVING
While teaching kids to budget is important, instructing them to save and to give are right up there at the top of my list. With an allowance, you have a great opportunity to introduce both of these concepts and help your kids develop positive lifelong attitudes toward saving and philanthropy.
Even the youngest kids can learn to divide their allowance into three jars: one for spending, one for saving and one for giving. With older kids, encourage them to set aside at least 10 percent of their allowance, gifts and any other income. Once they start to accumulate some savings, take a trip to your local bank and open a savings account.
When it comes to giving, you can help your kids earmark some of their savings for a particular charity or cause they can identify with, such as a local animal shelter or an organization that provides help to less-advantaged children. As you get your kids involved, I think you'll find the experience rewarding as well.
AVOIDING THE PITFALLS
There are a couple of other ideas I want to discuss in order to help parents avoid some common mistakes. The first has to do with associating chores with your child's allowance. While it may seem wise to have kids earn a portion of their allowance, it can sometimes backfire. For example, what if your daughter decides she doesn't need the money this week? Does she still have to do the chores? It might be best to make these responsibilities part of their contribution to the family and attach the allowance only when handling expenses.
Finally, once you establish an allowance, be consistent. Your part of the bargain is to make sure your kids receive their allowance on time and continue to get it.
It's only by having money, and the responsibilities that go with it, on a regular basis that kids really learn to value and manage it wisely. If these lessons are learned early, you won't have to worry when your son or daughter takes the first major steps toward financial independence. You'll already have put them on the road to success.
