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The Battle Cry For Kids' Money Management |
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How do our kids really learn to manage money? Most don't until they're
adults and then they learn primarily as a result of their own successes
and failures.
There's usually no course at school, no helpful hints on TV and
observing parents can be confusing at best. Typically, parent's money
management skills are often either not what we'd like them to be or our
finances are so complex that how we handle our money doesn't mean much
to a child.
To make matters worse, kids today have more money to spend and develop
financial styles at a younger age than ever. Before you know it, kids
can develop bad habits that can last a lifetime.
In fact, most parents don't deal with their kids' money management
problems until their children are adults. By then, these problems can
be both costly and emotionally charged. Young children provide parents
the best opportunity to encourage good financial habits and avoid
problems that will develop latter in life if this area is neglected.
The only way kids will learn to manage their money is through their own
experience and the guidance you, as parents, may give them. In other
words, kids learn from trial and error and role models just like the
rest of us. And if they can't learn as children, the price of adult
mistakes can be great in terms of money and relationships.
What Do I Do?
The first step, and the subject of this feature, is to Give 'em an allowance!
Here's why your kids need an allowance:
* Having a regular amount of their own income is the only way kids can learn to manage money.
* They need to be able to make mistakes when the cost is minimal.
* Knowing the limit of available funds forces kids:
o To think about how much things costs, and
o To make spending choices between the many things that they may want.
* They have more appreciation for the things they buy when they use their own money.
When Do I Start?
Once your child shows both an interest in and an understanding of the
concept of money - the fact that it can be exchanged for goods - they
are ready to start learning the basics of money management. For many
kids, this may be as young as three or four. Their first allowance
should be given at a minimum of once a week.
How much should I give?
Some would say a dollar for each year of age. Others would suggest you
match the amount their friends get. Neither approach is really much
help.
When coming up with the amount, try this:
* Determine how much money you already give them. If
your kids don't get allowances, you are managing their money for them
by deciding what they will buy and what they will do. Their role is
salesperson and manipulator. Let them learn to manage their own money.
Stop doing all the work. Total up the amount you are giving them now.
Give that to them as an allowance and let them make their own
decisions. You'll save money and avoid some of life's major battles.
* Make a list of what they are expected to pay for
with their allowance. Once you have the amount, sit down with your
child and make a list of everything they are expected to pay for. This
solves the conflicts that may come up in stores and as they walk out
the door to go to the movies. The total required becomes their
allowance. As their needs change, so can the amount. Be open to
reviewing it when appropriate.
Keep in mind the fact that kids have three uses for their money -
spending, saving and sharing. Consider all three areas when you are
coming up with the amount. In addition to setting the allowance, this
process puts an end to the constant requests to buy this and that and
to give them money to do whatever their hearts desire.
Should I Tie Allowances To Chores?
Do you believe your kids have a certain amount of responsibility around
the house just because they are members of the family? If so, those
responsibilities have nothing to do with allowances. In fact, if those
responsibilities are not fulfilled, the loss of privileges would
probably be more appropriate than the loss of allowances.
How can a child manage their money if they don't know how much they
will be getting on a regular basis? On the other hand, if a child does
not need their allowance that week, is it acceptable not to do the
chores? And finally, do we want your children to ask "How much?" every
time you ask them to do something around the house?
Remember, the purpose of an allowance is to give your children the
opportunity to learn how to manage money through their own successes
and failures and the input of their parents.
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David McCurrach is the owner of Allowancemagic.com
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