You and your 10-year old daughter are browsing in a toy store for a birthday gift. Your daughter has been lobbying for her own toy since you both walked into the store. Her pleas become louder and more insistent as you cruise the aisles full of Barbie dolls, clothes, furniture and large pink convertibles. You have been patient, answering each request for a toy with a, “No, honey,” response. Finally, your daughter gives it her best shot in a loud, whining voice she begs, “Mommy, pleeeaaassseee, please, just this one toy!” You match her intensity with an emphatic, “NO!” Her disappointment is evident and she asks in exasperation, “But, Mommy, WHY?”
Sound too familiar? What can you do to handle your children’s incessant requests for material possessions and teach them the value of money at the same time? A highly effective way is to teach your children skills in managing money by giving them an allowance. How should you handle allowances? Should you pay your child for doing chores around the house? What expenses should be covered with their allowance? At what age should you start giving your child an allowance?
Even five-year olds can be encouraged to use their allowance to help pay for toys and other treats. By eight, children understand the concept of saving money and by twelve; they can participate in using their allowance to help pay for expenses such as school lunches, clothes, and videos that teach them how to budget. The amount of money you give your child should be determined by five things:
- The child’s age.
- The experience of the child.
- How responsible the child is
- Your economic situation
- The cost of your child’s expenses.
Four things are important to consider when planning an amount for an allowance:
- Children should be given a certain amount of money just for being a member of the family.
- They should have some chores they don’t get paid for simply to contribute to the family.
- They should be provided with many opportunities to earn extra money through doing jobs in addition to the ones they are already doing.
- Parents should support their children by helping them design a weekly budget.
Children need to experience both the privileges and duties of being part of a family. One of the privileges is receiving a sum of money to be used for personal desires. They should have household chores for which they do not get paid. Payment for general chores develops an attitude of “How much will you pay me!?” for everything they do. If a child doesn’t do a chore, it is more effective to have a consequence for his behavior rather than withhold his allowance.
Children should be encouraged to create money in a variety of ways. One parent hired his son to do the payroll at his floral shop since he was so good at math. Shining shoes, washing windows and cars are other chores that could be used to hire your children.
How do you handle all those pleas for money? Help your child make wish lists. You can teach them the value of saving by helping them write down how much the item costs and setting aside an amount each week to be able to buy the item. Then, when your child asks for something you don’t want to buy, you can say, “That would be a great thing to put on your wish list.”
The following 8 tips will help parents implement these practices:
- Be consistent with your allowance agreement. Resist tears and tempers used to get you to give in.
- Learn to say “no” to children’s demands in a loving but firm way.
- You are not a loan officer. Unless you want to teach your child skills in paying back loans, do not get hooked into loaning your children money. Children need to learn the consequences of over spending. If you loan your child money, you might wind up spending the rest of your life bailing your child out of financial difficulty!
- Allow your child to spend his money the way he chooses. Do not lecture or criticize. Allow him to learn from his mistakes. It is better to learn these lessons at eight than later at age forty. The consequences are less severe!
- Avoid saying, “I can’t afford it.” It inhibits your child’s creativity. Instead say, “I’m unwilling to spend my money that way. But I would be happy to brainstorm ways that you can earn the money to pay for it.” This teaches your child that he can determine the amount he makes in life and that he is not a victim of circumstance.
- During family meetings share your experiences about mistakes you’ve made with money. Share this as information and avoid lecturing or moralizing.
- Start with a small allowance and build to a larger one depending on how responsible your children become.
- Allowances should not be used for threats or punishment. This will only build resentment later. Use natural and logical consequences as alternatives to withholding allowance.
Television has enticed children to want a lot of “things.” Parents often ask me in lectures, “How do I teach my children the value of money and that there is a limit to what I can afford? I think my child believes that money grows on trees!” One object lesson you can use to illustrate this is to cash your paycheck. Take out your budget and have your child put the money into piles for each bill or item. Show the child exactly how much is left over for family “extras.” In this practical illustration, your child will get the concept of budgeting and understand the value of money.
Children assimilate life management skills very quickly when those lessons are incorporated into their everyday family life. What better way for them to learn how to earn money, budget their resources, and feel valuable to others than to use allowances to do this! And, parents can feel proud that they have taught their children the value of money as well as a long-lasting investment in their children’s future well-being.
Kathryn Kvols is the President of the International Network for Children and Families and author of “Redirecting Children’s Behavior”.