Teaching Your Children About Good Money Habits: Allowance Tips
Most experts agree that the best way to teach money management skills to children is to give them cash and the control over how it is handled.
- Start giving an allowance by the time your child is six or seven.
- Pay them regularly and on time.
- Teach younger children money equivalents by giving the allowance in small bills and change.
- Clearly explain what the allowance is to cover - school lunches, entertainment, clothes, gifts, etc.
- The amount should be enough to cover their expenses but not enough where they won’t have to make choices about what is important.
- Give children guidance when they are trying to make spending decisions but leave how the money is spent up to the child (except if what they want to do is unsafe, etc.).
- To encourage your children to save, you may want to make them set aside a portion of their allowance to a savings account. Teach them that they should save their money for the future, for emergencies, investing, charity and everyday expenses.
Source: A Parent’s Guide to Raising Money Smart Kids.