The Basics in Teaching Children
about Money
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
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