Are you wishing your children were a little more fiscally responsible? Then consider giving them a few of their own pennies to rub together.
At some point children need to learn about money; how to spend it and how to save it. Most experts feel one of the best ways to do this is with a weekly allowance. However, don’t expect that once your child begins to receive an allowance that she’ll be a fiscal genius. Spending and saving are learned skills explains chartered accountant Cynthia Santin, and “it’s important for parents to assist their children with managing money initially. If, for example, your child has a shortfall in their allowance, then parents should not be too quick to cover the shortfall. This way a child can learn over time how to make these spending decisions, and if they are always being covered then there is not room to grow and learn.”
Question is, how much allowance should you give your child? Paul Lermitte, author of “Allowances, Dollars and Cents” recommends giving a child an allowance based on half their age, so if they’re six years old they receive three dollars per week. He also stresses that it’s important that they get their allowance on a regular weekly basis so that they can learn to budget those few dollars from one week to the next. “An allowance is important because kids need to handle money…what we’re doing is giving them something that they need to deal with for a lifetime. And so by starting with little bits and growing those amounts as they get older, they learn money management.”
Cynthia Santin adds that there are a lot of banks with accounts designed specifically for the young client and that it’s a good idea to take advantage of these. According to Santin, operating a bank account should be a part of a child’s education in money management to “learn the process of making money on money. This is important because they learn that if they save their money, they’ll have more money eventually.”
Finally, Lermitte says “tying allowance to chores, behavior or achievements in school is a big no-no. Let the kids deal with the money. That’s what it’s all about, to learn money management. If we take their money away, how will they learn? So if kids are not cleaning their room or doing their chores, take the TV or computer away, but don’t take money away. Let them learn about money management.”