Do you give your children an allowance? If you do, encourage them to use their money in ways that will help them to become financial savvy.
If you can teach your kids to use their own money at an early age, they’ll start to learn the importance of self-reliance. And those essential lessons are better to learn when they’re young. That way, the mistakes they make are with $5 bills, not $20,000 debts.
Of course, it’s important that your child feels a sense of ownership over their money. But if you build these expenses into a plan that divides responsibility between what you pay for and what they have to buy, it will teach them to link that ownership with a sense of value and accountability.
Encourage Your Kids to Pay these 6 Expenses with their Allowance
Checkout Line Items: As an adult, you know that the little things add up quickly. But if children don’t understand the value of money, they will give into every last whim or desire. One of the most obvious places? The checkout line. Whether it’s a magazine, candy bar, or featured gadget, tell your kids that those last-minute items are their responsibility. When they start using their own allowance to pay for the things they spontaneously desire, they’ll develop better self-control. And by learning not to indulge every single wish, they’ll become better able to manage money in the long run.
Lost Belongings: It’s easy for kids to lose items and then ask parents to replace them. But that doesn’t go very far in teaching them responsibility or the value of an item. A huge component of becoming an adult is realizing that we have to pay for things that serve necessary functions, not just the things that spark immediate joy. This is also a good way to teach your children an essential finance lesson – that money doesn’t grow on trees. When they have to pay for their own loss, they’ll learn to respect the item more. So the next time your child loses their backpack, jacket, or other belonging, let them use their allowance to replace it. Teach them to prioritize their expenses; they need to use their money to replace old items before they buy a new toy.
Library Fines: There’s nothing as groan-worthy as having to take control of your debts and loan payments. In fact, this is a huge area in which adults run themselves into trouble. Often, it’s easy to forget when bills are due, or to put repayments at the bottom of our budgets’ priorities. If your child has a library card, ask them to use their allowance to pay any fines they accrue for past due-dates. That will teach them to keep track when things are due – and the consequences of being late on returns.
Toys and Entertainment: Is there a toy your child has been eyeing? Or are they planning a movie outing with a group of friends? Help them to create their very own saving account for these kinds of expenses. There are several benefits to teaching your child to save for desired items. First, it gives them a sense that patience yield rewards. It also offers the idea that while they can use their money to buy anything fun products and experiences, they need to prioritize that list and make wise decisions. When your child begins to take accountability for their money and the corresponding prices of items, that will help them to understand the value of earning money. And it will inspire them to think outside the box when it comes to earning more cash as they grow up.
Donations and Gift-Giving: Encouraging generosity is one of the best things you can do for your children. Whether it’s a special charity or a gift for a friend’s birthday, developing a sense other people’s needs will help your child to grow into a loving and giving adult. And some of the most successful people in the world are also the most generous. Encourage them to put some of their allowance to buying gifts for friends or holiday gifts for family members. But make sure they understand that it’s the thought that counts – and that they need to spend within their means.
For more tips and advice on raising financially savvy kids, read our post on the essential money lessons parents should start teaching their children.