Jesus taught more about money than anything else, but without our help kids are unlikely to learn these lessons. Instead, they’ll learn the magic of plastic cards, the allure of advertising, and the importance of being rich. If we want to counteract these messages, we need to give an allowance, since children will not learn to spend wisely and save wisely unless they actually have money to spend and save. If you’re not sure how to begin, here are some ideas.
The Ins and Outs of Earning
Some financial advisors recommend giving kids "no strings attached" allowances, where they receive a share of the family’s money simply because they’re part of that family. You can always pay them for extra jobs, but chores aren’t required. Others, myself included, have a different philosophy: adults don’t get money for nothing, so neither should children. My daughters have to make their own beds and clean up their own toys, but if they want their allowance, they have to do something that benefits all of us, like clean a bathroom.
Whichever route you choose, keep these things in mind:
- Be consistent . Give an allowance every week, and make sure the chore chart—or extra job chart—is prominent. If you’re haphazard, savings lessons won’t be learned.
- Don’t pay for sloppy work .
- Pay by task, not by the hour . You want kids to learn the benefit of hard work.
- Pay a reasonable amount . Don’t pay so much that saving becomes unnecessary, but do pay enough that work becomes worthwhile. A good guide, if you can afford it, is $1 per year of age. This may sound exorbitant, but you may save money if you transfer all extras to their budget instead of yours.
- Start young . Even 4-year-olds can learn about money
The Ins and Outs of Spending
Money lessons won’t be learned if kids are free to spend all their money on chocolate. Instead, financial expert Larry Burkett recommended the "Money Bank" system, where allowance money is immediately divided between charity, savings, and spending. As children age, you can add more "banks", so that by the time kids leave home, budgeting is second nature. The chart on the side shows how this system works. Here are some other guidelines:
- Save for something specific . Make sure your children know what they’re saving towards. If they don’t, they’re likely to spend it on something spur of the moment, and lose the lesson.
- Keep your own wallet shut . If you constantly buy your children treats, or pick them up toys and designer jeans for no reason at all, they have nothing to save for.
- All money, not just allowances, should be divided up . If kids receive a birthday gift, baby-sitting money, or even tooth fairy money, it goes into the various jars, too.