It’s important to teach children how to become financially responsible adults. Every parent has their own idea of how to accomplish this goal. Some give money on an as-needed basis, while others encourage their children to earn money through jobs, either inside or outside the home. Many parents choose to give their children an allowance, and almost as many choose not to.
There are generally four ways children obtain money:
Cash gifts are those given for birthdays, holidays, and other special occasions. Cultural beliefs and family rules will sometimes determine when and how this money gets spent. For the very young child, the parents will decide on the spending, but as the age of the child increases, so too, should the child’s level of responsibility on purchasing decisions.
Earned money is that which is paid for a job that is satisfactorily completed. Earned money can come from jobs like a paper route, babysitting, or helping with the family business. Some parents have their children earn money by doing chores around the house.
The handout is money given by parents, to the child, on request. This method is often used with necessary expenses like school supplies or sports equipment, and for entertainment, like a movie or going for a treat with friends.
The allowance is usually a mutually predetermined amount of money given to the child at regular, agreed upon intervals. Allowances may be tied into services rendered (bed made daily, garbage taken out, good grades), or given regardless of what’s going on in the home that week.
Deciding how to teach a child about money management can be tricky. Parents need to step back and allow their child to make spending decisions independently. If parents choose to hand out money as needed, or to give an allowance, they might want to make sure to give enough to cover the necessary expenses, while leaving some fun money left over, or the child is likely to lose interest.
Lastly, remember to actually have the money on hand on the agreed upon day. We wouldn’t be happy if our bosses forgot to pay us, or asked us to wait until they had exact change.
Teaching children money management nurtures independence, responsibility, and confidence. Whichever method is used, it’s important to be consistent, fair, and honest. Your child will, eventually, thank you.