Teaching your young children about money is one of the most important things you can do as a parent. Don’t wait until they are teens to teach them responsible money management skills for a lifetime.
What lessons you impart depend on your kids’ maturity, but you can usually get started by the time your child turns seven. Don’t pass up this opportunity, because preteens still accept guidance from their parents; later on, peer pressure becomes a stronger influence.
Giving your kids an allowance is a great way to teach them how to set savings goals. Decide whether to tie it to chores or require kids to set aside a portion for savings or charity. (Charitable contributions can teach kids that, sometimes, feeling good about helping others trumps spending on themselves.)
According to a 2008 survey published in the San Diego Union Tribune, weekly allowances for children ranged from an average $2.84 for a child at age four to $9.58 at age 12.
Here are some guidelines to consider as you structure your children’s allowances:
Be reliable; pay allowances the same time each week. Sunday nights are perfect because your kids won’t have the weekend to spend it all quickly.
Use small denominations so they can easily set aside a portion for charity/saving, if those are your rules.
Never withhold an allowance as punishment. If your child receives a gift of money, it’s for them to decide how to save or spend it. Never “borrow” your kids’ money, and don’t criticize their decisions.
Daily Money Lessons
Look for everyday opportunities to teach money lessons. Teach comparison-shopping at the grocery store or, if they’re older, how to do so online.
Teach older children about investing by helping them buy a share of stock in a company whose products they buy, like the company that makes their iPod or their favorite snack.
Checking and Savings Accounts
Most kids are ready to open a bank account by age 9 or 10. They’ll learn that money doesn’t grow in ATM machines!
If Money’s Tight
If your family’s experiencing financial difficulties, be careful what you say. Don’t frighten children with extreme language.
If you’re a single parent, don’t overspend on your children because of guilt. Your children need quality time with you more than money. Don’t be pressured into buying the latest gotta-have it or impulse purchases. Encourage your kids to help the family stretch a dollar. Most kids will eagerly contribute if you value their input.