Aug 092011

We give our children an allowance when they start school, and we “pay their grade.” This means that in kindergarten, they receive 50 cents a week, $1 a week in 1st grade, $2 a week in second grade, and so forth. We do this because we believe that it’s very important to teach children how to manage money at an early age. At age 16, they’ll be expected to work part-time to earn their spending money, as my husband and I both did.

The truth is, most people learn absolutely nothing about money management until adulthood, and unfortunately, their money lessons are often learned in the school of hard knocks. People learn very quickly about the dangers of racking up unmanageable debt at high interest rates when they have to file bankruptcy, but I believe that my job as a parent is to give my children the tools they need to avoid that kind of painful situation. No one else is going to do this for me, and I don’t want to wait until my children are adults to try to teach them good money habits. In adulthood, their money problems could be very complex, costly, and tied to great emotional upheaval. However, when children are young, their sponge-like brains are eager to learn, so this is the best time to teach them about good financial management.

I believe that children can only really learn to manage money through experience, and with parental guidance, and a regular allowance has many advantages:

1) You must have money in order to manage it. When Bee was in basketball camp, her teacher told her that the only way to get really good at basketball is to handle a basketball every day, to get really familiar with how it feels in your hands. The same is true of money.

2) An allowance gives kids a chance to make minor money mistakes, and learn from them. Adult money mistakes are usually much more costly, and can have far-reaching consequences.

3) An allowance helps kids understand the concepts of income and expenses. They can learn to budget their money, think before they buy, and make careful spending choices.

4) It’s been my experience that children have greater appreciation for things they buy with their own money, and this often translates into more respect for what’s given to them. For example, when Bee and I were school shopping, I held up two dresses, and asked her which one she liked better. She asked, “Which one costs less?” When I told her that cost wasn’t an issue – both were on sale, so she should just choose the one she liked better – she replied, “Well, I just don’t want you to have to spend too much, because I know we have a budget.” (See? SEE?)

I think that allowance should be given weekly, and that it should not be tied to chores. Our children are expected to do chores as their contribution to our household, therefore their allowance is a gift (with educational benefits). It’s not contingent on the completion of chores (however, they can earn extra money if they do extra chores). When they don’t do their assigned chores, the consequence is usually more chores. I do think it’s reasonable to withhold allowance when a child is rude, disrespectful, or disobedient. I always tell my kids, “When you’re not nice, Mommy doesn’t feel very generous.” Children must understand that bad behavior has consequences, and taking a hit in the piggy bank is often a very effective way to teach that lesson.

I require that Bee take responsibility for collecting her money, and keeping a record of what she’s been given. Each Sunday, she must ask me for her allowance before bedtime, and make a checkmark on the family calendar, to indicate that she was paid. If she fails to do this, she’s out of luck until next week. I instituted this policy to insure honesty and accountability because, in the past, Bee would come to me and claim that I hadn’t given her any allowance for “several weeks,” and I often couldn’t remember whether I had or hadn’t, so I didn’t know if she was telling the truth.

It’s best to give children clear guidelines about what their allowance must pay for. For example, Bee’s allowance is intended for extras, such as candy, toys, CDs, etc. She’s not expected to contribute to the cost of her clothing, food, or school supplies, because at this point, it’s our responsibility as parents to provide for her basic needs. As she gets older, and her tastes in clothing become more expensive, for example, we will redefine those expectations.

We do encourage Bee to give to the church, and to causes that are important to her, and we try to set a positive example for her, but we don’t require this kind of giving. She must make her own spending choices, and we want her to give charitably if she is moved to – not because we force her to (for this is not truly charitable). We also don’t force her to save money because, again, we want her to understand the consequences if she doesn’t. The purpose of her allowance is to help her learn to manage her money through her own successes and failures, because those are the lessons that stick.

Bee is a diligent saver, so we opened a savings account for her, and this summer, I’ve taught her how to read her statement, balance her register, and fill out deposit slips. She enjoys learning these concepts, and I enjoy teaching her. I’m confident that when she goes out into the world for the first time, on her own, she’ll have the knowledge to make smart money choices.

And I will have done my job.


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