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Allowance Tips: Good Money Management Begins with an Allowance |
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The best tool parents have for teaching financial responsibility is an
allowance. Even very young children should have discretionary funds to
spend as they see fit. Saving, decision-making, planning, sharing,
charity, and responsibility are just some of the lessons that can be
taught through an allowance.
It's important to clarify that an allowance isn't money a child earns
for doing chores. Children should have age-appropriate tasks they're
expected to do without pay simply because they are members of a family.
An allowance is part of the parents' responsibility to meet the needs
of the family. The amount of the allowance depends on the child's age
and the parents' income. It should be adequate to meet the child's
needs but not necessarily every want. Perhaps the most important
benefit of an allowance is learning to develop independent thought.
Expect children to do some unexpected things with their money, but
allow them to make their own mistakes. The important thing is not to
rescue them with more money. Help them work through their own solutions.
We suggest the following tips for teaching financial responsibility:
- Teach philanthropy at an early age. A portion of a child's
allowance --- 10 percent --- should be allocated to charity. Encourage
children to participate in canned good, clothing, or toy drives for
charities. Help them to respond to natural disasters, such as
hurricanes or earthquakes, outside their community by donating money to
help.
- Teach saving at an early age. It's important to put something
aside for the future. Teach your children that saving isn't for
leftover money. Both the allocations for charity and savings should be
made before any discretionary spending takes place. As with the
donations to charity suggested above, the child should be encouraged to
set aside the same portion of allowance --- 10 percent --- for savings.
Children should have savings accounts by the time they're 8 years old.
If older children don't have savings accounts, remember it's never too
late to start a savings account for a child.
- Encourage an entrepreneurial spirit. If children have a special
goal, encourage them to find ways to earn the necessary funds. Don't
create unnecessary jobs just so they can meet the goal. That's the same
as giving them the money. Let them find a job and make the offer. If it
meets a need and the price is right, hire them.
- Never reward good behavior with tangible gifts. Goodness is its
own reward. Your approval and words of praise should be sufficient.
Paying for good behavior leaves parents open for juvenile blackmail.
Parents don't want to hear, "I'll stop crying if you take me to the toy
store," or "I'll come home on time if you buy me a new stereo."
- Don't try to compensate your children for your own deprivation as
a child. There are some purchases that signify changes of lifestyle and
qualify as rites of passage. Allow your children the pleasure and pride
that making those purchases for themselves can bring.
Teaching children financial responsibility can be an exciting and
fun-filled experience. It's not always easy, but when parents are
consistent, the rewards are immeasurable. Parents will be giving their
children skills that will benefit them for the rest of their lives.
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Brought to you by the National PTA. This article was excerpted from National PTA's magazine, Our Children.
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