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Teaching kids to manage money

January 23, 2015

Here’s a great idea…
In her book, Kids Are Worth It, Barbara Coloroso says, “What is important for kids to learn is that no matter how much money they have, earn, win, or inherit, they need to know how to spend it, how to save it, and how to give it to others in need. This is what handling money is about, and this is why we give kids an allowance.”

In other words…
Receiving an allowance provides children an opportunity to gain experience in money management. An allowance is a specific amount of money given at a regular interval. It gives children the chance to make spending decisions and set savings goals. An allowance isn’t payment for chores, a reward, or a punishment.  If money is used as discipline, a child will get the idea that everyone and everything has a price tag. It’s important to be consistent.

A child is ready for an allowance when she starts to show an interest in money and seems to understand the basic concept of exchanging money for goods or services. The amount of an allowance depends on the parent’s income, the child’s age, and the expenses the allowance is intended to cover.

Here’s how you can use this idea to have a better life…
Look at your budget and decide what you can afford for an allowance.  Decide which spending categories the allowance will cover: Toys or games, charitable donations, and entertainment.  Parents should provide guidance but also let the child have some freedom to make decisions. Give enough freedom to allow some mistakes but step in to prevent very costly mistakes. Try not to be too critical. Your child’s financial goals may differ from your own.  Praise successful efforts.

 

To find out more…
Watch the Kids & Money video about allowance at http://youtu.be/-e1RBzwBE6Q.

See the latest non-biased, research-based information on personal finance at the Cooperative Extension Service website http://www.uaex.edu/health-living/personal-finance

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