This month, our Bank On It blog is highlighting National Teach Kids to Save Month with a series of posts directly related to children and finance.
Teaching kids about finances is, on paper, easy. Carrying out those same lessons when your children have money of their own is a bit more challenging.
If your child is not old enough to have his or her own job, they may earn money by babysitting, doing odd jobs around the neighborhood or having a paper route. Another common way for kids to have pocket money is from allowances.
Depending on your personal income (and the duties it takes to earn it), you could have your child earn a weekly allowance. This helps to reinforce that money doesn’t come for free: You must work in order to get a reward. Earning an allowance can come from indoor chores, walking the dog or even maintaining good grades. Whatever method of earning that you choose, it is important to maintain the knowledge that children must earn the money.
Earning an allowance helps build work ethic, financial responsibility and good judgment:
As noted above, having an allowance provides a basis for a strong work ethic. Work creates rewards. Rewards come from work. This is a lesson that remains relevant all through life! Allowances help build financial responsibility because they teach children they must keep track of their money and decide whether or not they should spend or save. Good judgment stems from earning a limited amount; spending choices must be weighed carefully. For example, your child could buy a video game as soon as it comes out, or save that money to be used on an entirely new gaming system in the future.
Allowance amounts are dependent on your family’s personal income and what you feel comfortable with in your own budget. One suggestion is to provide $1 per grade in school per week. For example, your fifth grader would receive $5 per week or about $20 per month. Your tenth grader would receive $10 per week or about $40 per month.
As children become teenagers, it’s important to teach them about budgeting and that money is a finite amount. One way to help them with this (and help keep the family’s budget in line) is to give them a certain amount of money per week (or month) for clothing and for entertainment. This can be part of their allowance or a separate amount altogether. Either way, the teenager knows that this is the only money that they will receive from you for clothing or entertainment. The teenager learns to make buying decisions based on the amount of money that they have. If they want an additional amount to spend on clothing or entertainment, then they must find ways to earn additional money from outside jobs.
However, allowances aren’t always accounted for in personal budgets. There are other creative ways to help teach responsibility and rewards to your children, even if they don’t receive a certain amount every week. Some of these methods include:
- Taking your child out for a weekly reward, such as ice cream, a movie or a trip to their favorite local spot
- Letting your child plan his or her favorite meal for dinner on a certain night of the week
- Allowing your child to pick the movie on family movie night, or another similar family gathering
At The Callaway Bank, we strive to teach these lessons through the Callaway Kids Bank and by being a sponsor of Junior Achievement in Columbia.
There are lots of ways to get creative in teaching your children about finances. Ultimately, allowance amount is based on your own discretion. What do you do with allowances in your home?