A weekly, perhaps even monthly allowance, can help your kid learn more about money, like how to save it, and how to be responsible with their funds. It is recommended that children at a young age begin receiving allowance well before they start having their own financial obligations. You can give your child a regular allowance, or you can pay them for chores, but each opportunity is a chance for them to get hands-on experience when it comes to saving, spending, and managing money.
It’s not like the $10 a week, or the $20 a month is going to make your child a millionaire, but the habits they form from managing their allowance will allow them to be financially successful in life. Keep reading to find out money about how an allowance can have huge long-term benefits for your child. For more information about our child care in Coon Rapids, Each Bethel, Isanti, and Blaine, contact us today.
An Allowance Is A Money-Management Tool
Many parents may think that giving their kids an allowance, even a small one, is superfluous because of the gifts they get during holidays and birthdays, not to mention the money they already spend feeding, sheltering, and clothing their child. The truth is, however, that an allowance is not an entitlement, it is a valuable teaching tool. It may take a long time for both you and the child to understand this, especially if all you see them do is spend their allowance on the first toy they see in the grocery store, but it teaches your kid how to manage money.
Since it is illegal for your child to get a job, they won’t get this experience on their own, and an allowance is the best way to start them on the right track to real financial independence. An allowance truly is an investment in the long-run.
Have Them Use the Allowance for Basics, but Try Not to Set Restrictions
If you feel like you want to, or need to restrict what your child chooses to spend their allowance on, you could start out requiring them to cover some of their own basics, like clothes and school supplies. You could even give them a weekly allowance that is meant to cover their school lunches.
This can be a great way to help your child learn how to balance a budget and plan for expenses, surely giving them an idea of what it is like receiving “paychecks” and allocating money for necessary expenditures. Another option would be to give your child full freedom over what they choose to spend their money on — since it is their money now. Tell them, however, that if they spend their money within the first couple days of getting paid, then you won’t be giving them any extra money, and they will have to wait until their next allowance to spend again.
But, letting your child spend freely teaches them that sometimes buying everything they want only leads to clutter, and the immediate gratification loses its value quicker than they think it will. Guide them by helping them resist impulse spending, which is a challenge that even adults have to face. Your kids will like to make several terrible buying decisions, and you can help them realize this by asking “Did that toy make you happy?” Eventually, your child will learn to save their money, or make more reasonable purchases. Financial lessons cannot always be taught, and tend to stick better when the kid has some experience learning the lesson. Let them make bad decisions because, in the long-run, it will help them make great decisions.
No matter what scenario you end up going with, tell them that they always have the option to save their money, which is a financial skill that far too many people never learn how to do until late in their life. Saving allowances, no matter how small, adds up with time, and sooner than later, your child could have a nice safety fund that they could create a savings account with.
Talk About Money Often
Another good way for your child to understand money is to talk about your own. You can share your bills with them, how you budget, what you spend your money on, and so on. Talking about money can be tough, and you may even think it’s taboo to talk about money, but it is essential to discuss financial matters because it prepares them for their financial future.
If and when you decide to start paying your child an allowance, let them know how much you will pay them and when. Stick to this schedule so they can learn about receiving a fixed amount on a regular budget schedule, which is the key to learning how to manage a budget for steady cash flow, similar to that of a paycheck. You can also schedule pay increases, for example, each new year after the allowance begins, their allowance can increase by $5, building on their paycheck.
Make Them Earn It
One of the options you have when giving then an allowance is making them earn it through chores they do around the house. Pay them a commission based on things like taking out the trash, cleaning their room, mowing the lawn, taking the dog for a walk, and more. This concept helps your child understand that money is earned, not just given. Set up a pay structure of how much they will earn with each chore, or group chores together for a flat rate.
However, if you think that giving your child money for chores they should already be doing in their daily life, you could pay them a commission on things they take the initiative on, or chores that are special, like washing the car that warrants a special treat.
Teach Kids Money Habits Consistently
The best way to teach kids about money is to make it a continuous learning experience. Try to be consistent with your allowance, and you miss the pay-date, then make it a priority to get to the bank and start again. If you are teaching your kids about money, make sure the environment is safe and friendly — people can get tense talking about money, but your kids are just learning about the importance of money. Help them develop confidence in their ability to manage their own money, providing them with resources and tips if they ask for a little guidance.
There are all sorts of learning opportunities that children need some guidance on, and so many more that we have yet to cover! Stay up-to-date on our blog for more helpful guides and tips on raising a successful child! If you have any questions about the initiatives we take at our child care center to help your child grow with confidence, then please contact us and ask us about our preschool programs. We look forward to hearing from you!