- Teach them about real life – Nothing beats an allowance for a hands-on course in values. Having their own money teaches them about responsibility, consequences, saving and charity.
- Distinguish needs from wants – Do they really need that new gaming station or fancy piece of jewelry? Having their own money makes them think harder about what to spend it on.
- Put an end to the nickle-and-diming – You create a set budget item for yourself and stop that constant drip of money flowing from your pocket to random items for them
- Build trustworthiness – By giving kids money to manage, you demonstrate that you trust them. And they soon learn that to keep the money coming, they need to become trustworthy.
- Promote self-confidence – Managing money has a magical result on their self-esteem. Teaching them how to give some to their allowance to charity, save some for a long-term goal and spend some now gives them the tools of self-reliance.
When to start?
There are no set rules. However you might want to wait until your kids are old enough to manager their money and understand the concept, usually around age 6.
Think about how much money your child needs. A 6-year old might only spend a few dollars a week for small toys and ice cream, while a 12-year old will probably use more for things like movies, snacks and games.
Whether it’s weekly or monthly, kids do better when you stick to a schedule. Younger kids tend to manage their money more effectively when they get it weekly, since out of sight often means out of mind. For older kids, consider paying monthly so they can learn about budgeting.
Work for pay?
Think about your goals when it comes to the allowance-for-chores quandary. If your goal is teach your kids to manage money, give them a basic allowance with financial chores attached such as paying for their own collectibles. If you wan to teach kids the value of working for pay, pay them for extra chores for a job-by-job basis.
What about saving?
No matter what the amount, encourage kids to save a percentage for charity, large ticket item and spend the rest. Having their own bank account is empowering for them.
Feel free to share your comments and suggestions; I would love to hear what has worked for you.