New York Resident

by Victoria Pericon

Teaching your children good money management early on will help them gain financial independence and may very well prevent them from experiencing crippling credit card debt later in life. But they cannot develop financial responsibility and healthy attitudes about spending and saving without your guidance.

Providing your children with an allowance is an important step in teaching financial responsibility. How much to give your child, at what age the allowance should begin and the conditions placed on the amount given are all factors to consider. There is a debate regarding whether a child’s allowance should be tied to performing chores. Some parents believe that paying children to do chores is a mistake because they should know that performing household tasks is part of being a responsible member of the family. Others take the position that paying a child to do chores teaches the value of work.

Dr. Charles Sophy, blog author of “Keep Them Off My Couch: Practical Answers for Life’s Biggest Problems,” firmly believes that not only should an allowance be tied to the completion of chores, it should also be based upon adherence to house rules. Sophy also suggests that allowance should be discussed when the child is capable of understanding the exchange of money as well as the expectations around the payment. “The older the child,” says Sophy, “the more his allowance is tied to his utilizing the money to manage his own hobbies.”

How much money you give your child will depend on many things, particularly the child’s age and what you expect them to do with the money. Janet Bodnar, author of “Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them” (Kaplan Business, August 2005) advises three rules for setting up an effective allowance system: don’t start too young, keep it simple and tie the allowance to spending responsibilities. “Put young children in charge of the one thing they most like to spend money on, whether its stickers, crayons or mini racing cars,” says Bodnar, “You can expand the allowance as they get older to cover snacks, after school entertainment and clothing.”

If the child is responsible for buying his own clothes, lunch and paying for his own entertainment, you would have to give him a larger allowance than if you intend to continue providing those necessities.

It is a good idea to teach your children the importance of saving money as early as possible by making it clear that you expect them to put a certain amount of their allowance towards savings. Joni Kirk, mother of three young children started giving her oldest child four dimes each week when he was two years old. One dime was for church, one went to his “savings” piggy bank and two went into his “spending money” bank. Now five, her son gets four quarters each week for allowance. “I think overall this has been beneficial to our son. He has learned about savings and making judicial decisions—even at his young age,” says Kirk.

This article was written by Victoria Pericon.
If you wish to use this article in any manner, you must request permission.