Money can be a confusing and unapproachable topic for adults, let alone for kids. The key is to teach children about money early so that they can develop a healthy relationship with it.
Here are the best ways to give children a glimpse into the ins and outs of managing finances.
Roughly two-thirds of American parents give their children an allowance. This tried-and-true method of money management works for several reasons, with children of any age.
Make them earn it
Money doesn’t grow on trees, as the saying goes. Before they are at an age where they can work, children may ask for money to go to the movies with friends or buy the latest toy. Your children must understand that you work hard for your income, and one day they will need to as well.
Give children a baseline of expected duties every week. Make these age-appropriate chores to keep your household safe. Here is a list of ideas, which can vary depending on a child’s development and your level of supervision. These chores are not an extensive list, so be sure to adjust for your household’s needs.
Ages 4 to 5:
- Make their bed without supervision.
- Assist in bringing in light groceries.
- Sort their laundry based on colors.
- Light yard work like pulling weeds, with supervision.
Ages 6 to 9:
- Vacuum, sweep, and dust with minimal supervision.
- Help with mealtimes by setting the table and placing dishes in the sink.
- Empty household trash bins into a larger trash can.
- Intermediate yard work, such as raking.
Ages 10 to 13:
- Wash dishes or load dishwasher without supervision.
- Prepare their weekday lunches.
- Do their laundry with minimal supervision (ensure they use the right settings).
- Babysit younger siblings or assist with homework.
Ages 13 to 16:
- Mow the lawn.
- Deep cleaning tasks in the kitchen and bathroom areas.
- Care for pets without supervision.
- Run errands after receiving a license.
Before giving your child his or her allowance, set a time every week to discuss how well they’re doing and what can be improved on. Feedback is key because both positive and negative reinforcements help children understand why they are earning or not earning money.
Ensure it’s an appropriate amount
A good rule of thumb for calculating how much an average weekly allowance should be, according to Falco Wealth Management, is $1 for each year. For example, an 8-year-old is receiving $8, a 9-year-old $9, and so on.
The allowance should be just high enough for making a few small purchases or one larger purchase. This monitored amount ensures they’ll be motivated to keep working for more and feel the satisfaction of spending their hard-earned money. On the other hand, it encourages them to go above and beyond if they want a larger allowance for more spending.
Introducing your children to budgeting is invaluable. Take small steps, depending on their age, to develop a budget and use this for calculating what they want versus what they need against their allowance. Show them that needs like fees for a school trip or club come first when saving, while wants, such as going to the movies or buying sweets, come when you are on track with saving for needs. Develop an Excel spreadsheet or a simple paper-and-pen system for tracking. Tracking keeps them honest, focused, and motivated.
Children tend to brag about their material items to their friends, and it is almost unavoidable. Teach children the importance of money etiquette early on to avoid inappropriate discussions down the road.
Keep financial information private
The frequency and amount of money you give your child should remain private. Just like an adult talking about salary in the workplace, it’s an unspoken rule most people follow. It can be hard for children, in particular, to realize they receive a different allowance than their peers. Emphasizing financial privacy will help them understand the delicate nature of the topic. Tell them it is best to talk about money with you or other family members, or, when they reach their teens, directly with their employer.
Do not compare
Following the lesson above, you can’t stop other children from telling your child how much allowance they make, but you can control how your child reacts and responds. Comparison is a thief of joy, and it won’t serve them well to compare their money to others. Educate them that their only reaction and response should not be pride or envy, but rather a drive to help others and work harder. Prepare them with appropriate responses if a peer asks how much money they receive.
Loosen attachments to money
There will come a time when your child goes shopping with friends unsupervised, and it’s a good habit to teach them that if a friend is short on money and they can help, that they are allowed to assist them if they choose to. Ultimately, this teaches them common courtesy and that their money isn’t all their own to keep anyway. There are taxes and other places they’ll need to put their cash with little to no expectation of getting the money back.
Your child’s relationship to money will help them prepare for the world ahead of them, so use these tips as a starting point and consider talking to a trusted financial advisor about strategies suitable for your family.