The subject of allowance, how much, when and what for. I covered that in the last post, but why should you give your kids an allowance? The biggest reason is to help them learn how to manage money. How many of you were taught the basic lessons of spending, saving and sharing?
When your kids are old enough to spend money they should get an allowance from the family’s funds, it can vary but probably by kindergarten or grade one. You are teaching them how to manage money; invaluable lessons most of us did not get and had to learn the hard way. This is your chance to start your kids off on the right track.
An allowance is not about giving them extra money; basically look at it as money you are going to spend on them anyway, just given in a different form. Instead of paying for things at the time your kids want them, you pay them an allowance and let them decide how to spend the money.
The ultimate goal of an allowance is to teach them to distinguish between needs and wants. It’s the best way to teach your kids how to spend and save. When they use their own funds it becomes more real and tangible to them. When they only get a certain amount each week they soon learn that there isn’t Mom and Dad’s limitless wallet. Nowadays kids come up and say…”Just go to the wall Daddy and get money out!”
You teach them to prioritize and save. Kids need to learn the difficult lessons about money, they need to handle it themselves and make their own mistakes. Once you’ve given an allowance, walk away from it. The money is no longer yours; therefore you no longer control it. It is now up to your child to decide how it should be spent or saved.
Do you have a spending plan with your money? Do you use a budget? If you are going to teach our kids about spending – then they should have a spending plan. When the word “Budget” is mentioned most run and hide. Why? As adults we may not be following a spending plan or a budget.
It is important that we know where our money comes from and where it goes.
If you don’t budget your own money now or have a spending plan, then this could be your chance to start one and teach your children at the same time.
When I work with couples with kids I tell them to share their cash flow statements with their children. Money has been a taboo that ‘you don’t talk about with others’. How many of you had no idea of how much money your parents made or how much the household expenses were?
I did not, and therefore I had no idea when I went into the real world about household expenses, income or having a plan.
We are not doing our kids any favours by not talking about money with them. Do you talk money with your partner? In part 3 of Kids and Money I will talk more about having a plan for your money and helping your kids to plan their money… stay tuned!