Teach your kids about money with an allowance
Teaching children about money management from a young age can be incredibly beneficial for them as they mature into their teenage and adult years.
One way to teach children about money management is by giving them an allowance, or an amount of money for them to manage on their own. Some parents/guardians choose to give allowances in exchange for chores, and some simply give their kids money. Either way, it is a helpful way for kids to learn how to handle money including spending, saving, and general everyday money management.
According to the app RoosterMoney, children start receiving an allowance around the age of four. Parents/Guardians typically choose to give their child a weekly allowance that correlates to the child’s age. For example, a five-year-old will receive about $5 a week, and then an additional dollar per year as they get older (source: CNBC). Receiving an allowance in exchange for chores will help kids start to learn the value of a dollar, and they will have more freedom when it comes to saving up to buy things for themselves.
A key for success is to explain exactly what a child has to do in order to earn this or her allowance. Maybe they have to make their bed, pick up their toys, help with laundry, or care for a pet or houseplant. Once a child knows what he or she needs to do to receive an allowance, next explain to them how much you’ll pay them to complete these tasks, and how often they will get paid.
When discussing money, you can also talk about the importance of saving. Help them set savings goals like purchasing a new toy, buying clothes for school, or putting the money in their own personal savings account. You can also discuss long term savings goals like paying for their education, buying their first car when they get their license, or even saving for an undetermined goal.
At M C Bank, we have many savings accounts that can help support your child on their savings journey, and these accounts come with free Online and Mobile Banking and eStatements to support money management.
Once they have some money set aside and are ready to shop for their chosen item, help them understand the importance of shopping around, using coupons, or searching for sales. Managing all aspects of money will help make them more aware of how money works and how it should be handled. You can even get them a wallet and a piggy bank, so they can personally store and handle the cash. For older children and teens with smart phones, you could consider using an app (there are several allowance apps like RoosterMoney).
When discussing money, it can also be motivating to discuss giving money. You can teach them about different types of charities like food pantries, animal shelters, or an organization specific to your community. Let them choose where to give their money and determine how much to give. By teaching your child the importance of giving back, you can teach them an important lifelong lesson about helping others.
If your child decides they want more money than their agreed upon allowance, you can encourage them to think about additional ways to earn money, like doing extra chores, selling books or toys, or once they are old enough, doing chores for others, like mowing a neighbor’s lawn, babysitting, or pet care. Encouraging an entrepreneurial spirit will help your child see that they can be creative when it comes to earning money.
As your child progresses through their savings journey, it’s important to let them make mistakes and then discuss how they can improve in the future. Maybe they spent all their money on one toy and realized they didn’t have enough left over for something else. It’s important to talk through these mistakes and help them learn the lesson so they get practice managing their money while the stakes are low.
Overall, starting your child’s money management journey as soon as possible will help them significantly in the long run as they grow up and begin to have various goals for their saving and spending. Teaching them how to earn money will help them understand the importance of having a job, saving, spending wisely, and giving back.