Teach Children Financial Responsibility with an Allowance
Whether or not to give your kids an allowance is a hot-button issue. There are strong opinions on both sides from parents everywhere. However, the research is pretty clear: financially speaking, it’s a great way to teach your kids the value of money.
Some people may cringe at the word “allowance,” believing that it fosters a feeling of entitlement, which is exactly what we don’t want. But, if we think of allowance as the process of teaching our kids to earn, save, spend, and value money, then it becomes more about setting our kids up for financial success later in life.
The two aspects of allowance that seem to be agreed upon from supporters and critics alike are that teaching kids to budget and keeping an open dialogue about money are important.
Learning to budget is a valuable part of being an adult, and if we can teach this skill to our kids when they’re younger, even better. Encourage your kids to set aside part of their allowance for immediate spending, savings, and other things like donations to charities, college funds or other long-term goals. When they are old enough, help them open a checking/savings account and get a debit card. They can even log on to their accounts online or on a mobile device.
Throughout the process of starting an allowance system, keep talking to your kids about their finances. It’s also important to let them fail a little: if they spend all their money on something trivial they must deal with the consequences (having no money for things they need) of that decision. It’s better for them to learn that lesson on little things like candy and toys, instead of something like a brand new car!