The Atlanta-Journal Constitution recently published an article about how parents can teach their children to respect and manage finances early. This begins with an allowance. The question many parents struggle with is , "How much should I give my child?" Based on the advice of Dr. Janet Stern Solomon, author of "Bratproofing Your Children: How to Raise Socially and Financially Responsible Kids", the article provides several tips on managing an allowance and teaching financial responsibility to your child.
- An allowance should be a fixed amount at regular intervals; the amount and frequency depends on the age and maturity of the child. Kids are never too young to receive an allowance - even a 3-year-old understands that if the coloring book they want costs $3 and he or she only has $2, then they will have to wait and save for the next allowance.
- Never link an allowance to household chores. Picking up after oneself is simply the child doing his or her part. This should not be a bargaining tool. The same rule applies towards grades. Good grades should be expected not rewarded. However, rewarding a child for a special academic honor or paying for a big chore, such as raking the fall leaves or cleaning the garage are appropriate.
- The biggest piece of this financial lesson is teaching your child the value of SAVING. Give your child their allowance in single bills, allowing them the opportunity to spend a little, save a lot.
- When children reach the age of 10 or 11, it is important to include your child in the discussion family finances. A great tool to use is monopoly money. Start by piling together the money that mom and dad bring home each month. Then go over each monthly bill and expense, noting how much each costs by taking the monopoly money away from the pile with every deduction. This is a dramatic and powerful visual tool for your child to see exactly how much it costs to run a household.
Teaching your child the value of the dollar and the reward of savings is an invaluable lesson that needs to be discussed at an early age. In today's economic uncertainty, we as parents owe it to our children to educate them on this essential life lesson.