Allowance tips and tools for parents in raising good money managersPosted: Updated:
There’s been some debate on whether allowance should be linked to chores since helping out around the house and being a contributing member of the family should be more of a requirement rather than an optional endowment.
When thinking about allowance, it’s important to consider tasks that fall outside of regular responsibilities. While the association between work and pay is one lesson that an allowance can teach, it is not the only lesson necessary to raise a good money manager.
Following are tips from Money Management International (MMI) to help you teach financial skills to your children as they grow as well as a few examples of tools to help get your point across.
Teach: Preschool-aged children can learn money recognition. Let them handle different types of currency and teach them the difference between quarters, nickels, dimes, pennies, and (if you trust your preschooler) dollar bills.
Tool: Give preschoolers different values of coins and a piggy bank or jar to put their money in.
Teach: Give your elementary school-aged child a lesson in savings and banking by opening a youth savings account. Teach them about depositing their allowance into their savings account and how, through the power of compound interest, their money grows.
Tool: Start a savings account for your child through your bank.
Teach: The tween years, around ages 10 through 13, is an ideal time to teach children about financial goal setting and smart purchase decisions. Let tweens put their savings skills to the test and exercise some financial independence by encouraging them to save up for a special purchase. Help your tween set a reasonable financial goal and calculate how much they will have to save in order to reach it.
Tool: Youth cash or checking account and chart to track their progress.
Teach: After high school, your teen will most likely go to college or start working full-time and need to manage their finances on their own. Now is the time to teach teens about the wise use of credit and how to live on a budget.
Tool: A job is a good tool to help teens learn how to earn and responsibly budget their money. Some parents believe in helping their teen build credit by getting them a credit card. Under the CARD Act, anyone under 21 cannot get a credit card without a parent cosigner (unless the teen has proof of a steady stream of income).
Now that you are prepared with the tools and lessons to raise good money managers, just how much allowance are you planning to give your children? Share your parental insight by participating in MMI’s allowance poll on MoneyManagement.org.