Teaching children the value of a dollar is not a concept they’re going to be able to digest over night. Once they’re at the age of wanting items, it might be time to start introducing the topic of personal finance. Here are some tips about introducing an allowance.
Teaching Kids About Money Through An Allowance
If your child is old enough to help out around the house, it may be time to discuss the option of an allowance. As a result, they will need to learn some basic financial principles as well. Here are some ways to discuss the topic of an allowance:
- Explain first, that special items or “wants” need to be saved for outside of the budget. For example, if your child wants an electronic device, he or she must save in order for that item to be purchased.
- Use an example of a time in which your family had to make sacrifices to save to be able purchase a big item. Was it for a vacation? Was it purchasing a bike for someone’s birthday? Explain that it might take time to achieve a goal. Introduce the topic of making a SMART goal.
- Introduce your child to the idea of working to earn money. Use yourself as an example: describe what you or your spouse does for a living to earn the money to take care of the family. Then, designate some jobs your child can do around the house so that he or she may be able to earn money.
- Clarify that some things you do around the house are because you are doing your part for the family and some things are extra work. You earn money for the extra work you do around the house. Allocate a specific dollar amount per each job that will qualify for an allowance.
- Use this Chore Chart so that you and your child can keep track of the chores that have been completed each week.
Teaching Finances By Example
One of the best ways to teach your children about money is to have them work for it. Your kids will be much more likely to take better care of their things and spend more carefully if they can experience the amount of work that goes into making money.
Remember that a child’s relationship with money is heavily tied to how they see their parents use and interact with money. Try to set a good example for your children and involve them in any financial decisions that you see fit.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.