In this economy (heck, in every economy) money is on everybody’s mind. How to get it, when to save it, where to spend it—questions about money can even boggle grownups.
I think that one of the best ways to teach your kids about money is to give them a regular allowance. This teaches them three things:
1. Once you spend your money, it’s gone.
2. If you don’t spend all your money as soon as you get it, you can save until you can buy something you really want.
3. Mom and Dad think I’m responsible enough to have money of my own!
We started allowances by giving 50 cents a week when each kid turned five. It would go up by 25 cents each year until the kid was making two bucks (which coincided with entering middle school where we live), and then went up a buck a year until the kid reached high school age. It’s capped at $5 a week and stops altogether when the kid becomes a high school senior.
We set a fairly low rate for our allowances, for several reasons. For one thing, kids who have TOO much money will get into trouble. We wanted to allow them to have the occasional splurge, not finance a car. Then, too, a very small child doesn’t have much concept of money as anything except candy tokens. We decided that once a child was in high school they were old enough to take a part-time job if they needed more than $5 a week, and middle-schoolers could babysit or mow lawns to supplement their incomes.
Some families give allowances for chores, but in my opinion kids should do chores to help keep the family running; they don’t get paid for vacuuming until I get paid for vacuuming. Occasionally if we had a huge project to tackle we would offer to pay someone to do it, but this was rare and (mostly) voluntary.
We also didn’t expect our children to do anything with their allowance money, but there are circumstances where I think that’s appropriate. For example, if a family tithes, it’s a nice idea to give a child (say) $1.25 a week with the understanding that the quarter goes into the collection plate. You might also give an older child a larger allowance with the expectation that they will use it to buy school lunches or other supplies.
The flip side of this is that WE have to keep our mouths shut if a kid wants to blow their whole allowance on something we don't think is a good value. Allowance money is their money to spend.
When our kids become seniors in high school, we give them “training wheels” by opening a joint checking account in their name. There are a lot of extra expenses senior year, so we decided that rather than us agonizing over every aimed-at-the-graduate-to-be brochure that came home in a backpack we’d give the money to the seniors and let them make the decisions. That way they could decide among the class ring, the letter jacket and the all-inclusive senior portrait package—or keep the money and skip all the hoo-hah.
The amount we give them monthly depends on the child, the year and our circumstances at the time. This approach requires careful monitoring, but it’s a great hands-on technique for teaching almost-college-students about balancing checkbooks, managing money and the responsible use of debit cards.