Allowance Tips and Tools
There’s been much debate about whether or not parents should tie their child’s allowance to behaviors, such as doing chores. Some parents believe that earning an allowance through doing chores helps their child associate work with pay. Others view chores as a family responsibility, not as a paying job. No matter which side you take, all parents can agree that allowances create opportunities to raise children to be good money managers.
Following are ideas 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, and pennies.
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?