The relationship of kids and money begins at an early age. And, knowing how to introduce the concept can make all the difference.
I have done some research and spoken with experts and many of them agree that giving an allowance, followed by practicing a kid-friendly financial plan, is a great way to teach children about financial responsibility.
Below are a few tips that may help, and remember, don’t think of it as ‘paying your kids,’ think of it as ‘teaching your kids how money works.’
Pay an allowance on chores your child is not already doing. Or, find an activity that doesn’t happen smoothly. For example, if you find yourself always having to remind the kids to clear their dishes after dinner, offer a reward if they do it without you asking. Once they have that down, move up to healthier eating, and then helping with cooking, etc… Start out small and work your way up. Small successes lead will lead to big rewards for both of you.
When do you start paying out an allowance? Some experts agree that it’s a matter of education, not age. For example, when your child expresses “wants,” this is a great opportunity to introduce the concept of setting goals. Others agree that the maturity and understanding of the financial concepts happen somewhere between ages 5 to 8.
Never let kids spend 100% of their money. Teaching children the 10/10/10/70 concept will guarantee a brighter financial future. SPEND 70% for everyday expenses, SAVE 10% for the future, INVEST 10% to build your fortunes, and GIVE 10% to a charity of choice.
- The easiest way to implement an allowance is take what you are spending on each child already and transfer the earning power to your child. It won’t cost you anymore than you are already spending, but the financial lessons will be priceless. Your child will learn the value of money. Just be sure to have the spending be 70% of the total allowance so there is room to follow the 10/10/10/70 rule.
Finally, how much you give for an allowance should be based on your disposable income, not the child’s age or what the kids next door are getting. Keep a balance – i.e. not too little so the child feels penniless, and not too much where the child can afford anything he wants.
About the author:
Lisa LaGrou is the founder of OaklandCountyMoms.com. She and her team work to present quality content to their readers. Lisa likes to provide information and options for families about a myriad of topics without preaching or condoning. If she experiences something, she want to share it. If she doesn't know about something, she tries to find information to share. She's delighted when people contact her with suggestions about content and resources. For more information on how to become a member of Oakland County Moms click HERE.