Parents who take the time to teach their children about money will be doing their children a great service. As a parent, it is important to look back on your youth and think about how your parents taught, or did not teach, you about money. Then think about what you would like your child to know about money. There are many different ways you can go about teaching your child about money. What they learn from you will most likely follow them the rest of their lives.

Teaching children about money can provide life-long lessons of responsibility. For example, if a child spends all his or her money on soda and candy, he or she might not have enough left over for an afternoon out with friends. This scenario could have two endings. First, the child receives money from you to cover the expense for the outing, or second, he or she talks with their friends about doing something that does not require money. This might sound harsh to not give up a few dollars so your child can have an afternoon out. However, take a look into the future. If your grown-up children, spend all their money on luxury items (cars, trips, music, etc.) they may find themselves short on money for a house payment, tuition, or an insurance premium. The consequences then will be much more severe.

Remember each child is different and may require a different approach to ensure that learning is successful. There are many different ways to help children understand money. This can be done through an allowance, budgeting, and teaching them different aspects about finances such as savings and credit.

Allowances

There are many different ways an allowance can be approached. You may not favor an allowance option; however, consider the following ideas and then formulate something that will work for your family.

How to Determine the Amount of Allowance:

• The first step is to decide which expenses you expect your children to manage. If you only expect them to provide for their own entertainment with friends (movies, candy, etc.) then their allowance should reflect that. Take the time to figure what they might typically spend to determine what would be appropriate. If you determine that they should be responsible for clothing, sports, or music lessons then their allowance should be large enough to cover those expenses. Remember, if you expect them to pay for their music lessons it will be important to help them pay that amount first, then they can do whatever they want with the rest. If they spend their money frivolously they might not have enough to pay for their lessons. Take into account the maturity of your child and what skills you would like him or her to gain.
• A second idea would be to give each child a dollar amount based on his or her age. As children age then their allowance will increase (remember to keep in mind which expenses you expect them to manage). Once they reach an age where they can earn their own money (perhaps in a summer job) consider reducing the allowance, or encouraging them to save more of their earnings.
• A third idea would be to have each child be responsible for certain responsibilities around the house. If they complete the tasks then they receive an allowance. This could be thought of in business-like terms, doing the work results in a paycheck.
• For children who do not respond to doing chores for their allowance, set their allowance in a different manner (see suggestions above). However, being a part of a family does require working together for everyone�s good. Children can be expected to assist with household chores, if they do not do their share, consider taking away a privilege.
• Some may consider just giving their children money as they need it, encouraging them to be helpful around the house. This might be called a �you help me, I�ll help you� approach. This could lead to children learning that any time they need money, it is just given to them. It is valuable to learn that money comes with a price (working for a paycheck) and will not always be handed to them without strings attached.

What an Allowance Can Teach:

• Valuable lessons about money management can be learned through budgeting. Children should learn how to save a portion of their allowance, and how to spend appropriately for what they want or need. This can be taught by using envelopes, or jars, for the children to separate their savings from their spending money. Determining a percentage of their allowance to be saved, will eliminate reevaluating how much to save in the event their allowance increases.
• You can teach your children about interest by setting up a savings account at your local bank or credit union. This way the children can see their money grow. Then children can create their own financial goals for the future and have a purpose to their savings. Perhaps it will be a percentage of a new bicycle, a dress or suit for a dance, or even a down payment on a car.
• Teach them that interest also works in reverse. If things are purchased on credit, an interest rate will be applied. This will be money going away from their account, not growing in their account.

Involve Your Children

Have your children play an active role in how they are taught about money. Remember, every child is different and may require learning in a slightly different way. Play an active role in their learning process, but allow them to make their own decisions. Experience can be the best teacher. This way your children will learn money management skills when the stakes are low and when they grow up they can successfully manage larger amounts of money.

Information Adapted from: "Financial Remedies" by Alena Johnson, Utah State University Lecturer and from Utah State University Extension�s Family Life Frequently Asked Questions