Parenting with Heart & Soul

Teaching Children About Money, By Sahara Pirie, CPDLT

31 Jan 2013 11:30 AM | Anonymous

In our house the purpose of allowance is to learn about money.  Period.  It is pretty hard to learn about money if you don't have any, so we give an allowance.  I will detail our process as an example, as with any parenting decision, please weigh our process against your value system and replace anything that doesn't work for you with something that does.  I feel very strongly that when teaching skills we should

a)      take time for training;

b)      offer as much involvement for the learner as is developmentally appropriate;

c)      use mistakes as opportunities for learning and problem solving and

d)      omit threats and imposed consequences as well as artificial rewards. 

With those goals in mind, here is an 'accounting' of what we have done.

We started allowance around kindergarten age, we did it by telling our daughter that we thought it was time for her to start learning about money and asked her if she wanted to do so - she said yes.  Both her dad and I have had some money issues, and we want to teach her some skills from an early age that we didn't learn until much later and as a result made some costly mistakes.  So we set 4 jars before her and told her that

·        one jar was for Financial Freedom - that the money put in that jar would never come out, but would earn more money for when she wanted to retire (actually it comes out of the jar itself but is only used as an investment, right now it is in a savings account, as she gets older she will get to pick her own investments);

·        another jar was for Play - she could spend it on whatever she wanted;

·        another jar was for saving to buy something later, we call it the 'Buy Later' jar;

·        and the 4th jar is called Give - this is for giving to others such as charity.  

She decorated the jars.   We told her that 10% of any money she received needed to go in each jar and that she could put the remainder of the money into whichever jar she wanted.  I asked her if she thought she was old enough to do this.  She said yes.  Her original allowance was $1 and it was given to her in dimes and we got a little math lesson as a bonus.  We've stuck with this method ever since. 

As she has gotten older, her allowance has grown with her ability to be responsible with money.  She spends it on things that she values, it's her money and this is how she will learn about it. It can be hard as a parent to stay out of the way through this, but important all the same. She's made a couple of mistakes, they've provided the best lessons yet.  She's nearly 14 now, and earning money in addition to her allowance.  We hold her to the same standard with earned money and gift money that we do with allowance.  She get's great satisfaction to donating her charity money to her favorite charity.  And she has several 'buy later' jars these days - one for each thing she is saving for (including one for travel!).  Last  year she took on the responsibility for paying for her gifts to others, her allowance went up a bit with that responsibility and she'll be expected to earn some money to subsidize it.  At 13 we added a clothing allowance, she gets a set amount of money per month to buy her own clothes and shoes with.  The clothing allowance is minimal - it's enough for basics, but not a lot more, if expensive and/or trendy clothes turn out to be a value of hers, she'll need to subsidize that clothing allowance to afford them.  Regarding the clothing allowance there is one other element to it:  if she chooses to sew and make her own clothes she will get reimbursed for the material and notions once the garment is complete.  My mother did this for me and as a teen it gave me the opportunity for extra cash flow, I loved it.  I made quite a few of my clothes and I became a competent seamstress in the process.  If I had a son, I'd make him the same deal.

In future years the lessons will expand, they will include taking on more household responsibility in regard to the budget.  Examples for teens are planning a vacation budget (looking up airfares, hotels, estimating food costs etc.); taking over the grocery budget and shopping; and paying household bills.

Some families don't think any money should be 'given'; that it should all be earned.  If that is the case in your family, help your kids find things that they like to do, things that give them joy and brainstorm ways that they can make money at it.  My daughter likes to sew, so she makes bags full of rice that can be heated in the microwave and she sells them to my massage clients (I'm also a licensed massage therapist). She has also made many stuffed animals for gifts for friends.

I personally feel strongly against linking allowances with chores, I think it's a recipe for trouble, distracts from the lessons of money and should be avoided.  Which is not to say your children shouldn't contribute to the house by participating in household work - but that is another article.  Allowing your children to gain some money so that they can play with it and learn from it is an excellent opportunity.

Now you have some ideas, before you dive in take some time by yourself or with your partner and identify what your values are around money.  If your partner has different values, decide together what you want your kids to come away with.  If you start by knowing this you can design your own lessons to support it.  Best to you!


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