Teaching your kids money management is a vital tool in developing good spending and savings habits. From a young age, by implementing an allowance you can teach the value of managing money. When do you start giving allowance? What is the allowance for? How much do you give? How do you get them to save? By starting these processes of spending and saving you can set your children up for a successful financial future.
Deciding when to start giving allowance is typically based on when children first start learning about money. 1st grade can be a good starting point due to the fact that kids will start learning money in school. It might be a good idea to mix up the allowance that you give, for example, a dollar one week and 4 quarters the next week so that they start learning the difference. In an article on Bankrate.com they state that when a child gets to the stage of “I want that,” that it is time to start giving them an allowance which is usually between ages 3 to 5. There are different points of view on what age to start, but once a child begins to understand money and wants material items it’s a good idea to introduce allowance.
When giving allowance in measured increments, once a week is a good rule of thumb, you should determine what it will be used for. As children grow older and have more needs and wants, it is important that they have enough money to budget for certain things. For young children, allowance might be for candy or a toy. When older, it might be for movie tickets, concerts, outings and the list goes on. Based on what you think the allowance should be used for, there should be a dollar amount associated with the things they will be required to purchase on their own. It is also important not to just shell out money whenever you hear: “I want.” You want to make sure that your children know what you expect them to pay for with that allowance and also teach them to save for some of the bigger ticket items. Clothing is something that needs to be factored in as well. With clothing you may want to give your child a clothing budget yearly so that they can learn that value of spending that money wisely on the items that they want. Experts say that you do not want to give money based on them doing chores. Kids need to see that helping with family duties is expected. If there are larger more involved chores, you may want to give extra funds that are laid out prior to the task.
Part of giving an allowance will leave room for a lesson on saving. Some parents will also choose to have their child save some money for charity. With long term and short term goals in mind, you can set up the amount they should save based on what it will be used for. 10% might be a good starting point to either save for larger items or using it for saving for college. Either way, it is an important skill to learn saving money at a young age to build good habits.
Early development of good financial habits is a must. Children learn habits at a young age; so by starting kids with good budgeting, spending and savings habits you will set them up to have a successful financial future.
Photo by Anthony Garcia
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