Money Smart Kids Allowance Tips

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.

Allowance

Experts agree that the very best way to teach money- management skills is to give your kids cash, along with control over how it's handled. Allowances provide hands-on, real-world experience in managing money and teach kids about decision-making, budgeting and the value of saving. 

When and How Much

Start giving an allowance by age 6 or 7. Some parents start even earlier, as soon as their kids learn the different values of coins and bills. Children ages 6 and up, however, usually have a better understanding of money and responsibility. The amount of the allowance should be enough to give your kids practice in spending—but not so much that they won't have to make choices. Some popular weekly formulas are $1 or $.50 for every year of age, or $1 for every year of school (e.g. $3 for a second-grader).

The Chore Debate

Most money experts agree that an allowance should not serve as payment for doing chores. Chores are part of kids' responsibility as members of the family. However, consider paying your kids for extra, more demanding tasks, such as cleaning out the garage. If it's a job you would pay others to do, such as baby-sitting, house painting or washing the car, hire your kids instead. 

Allowance Tips

ü  Pay it regularly and on time, such as every Friday evening.

ü  Give younger kids a weekly allowance, but consider paying teens on a monthly basis to reinforce budgeting skills.

ü  Clearly explain what the allowance is expected to cover. Are your kids supposed to buy school lunches with it? Purchase clothes and gifts? Or is it just for personal entertainment and treats? The amount you provide should realistically cover the anticipated expenses.

ü  Give out the allowance in small denominations. For example, if it's $2, give a $1 bill and four quarters. This teaches young kids money equivalents and helps them divide their income into savings and charity.

ü  Provide guidance, but leave decisions about how the money will be spent up to your kids (except if the proposed purchases are unhealthy, unsafe or contrary to your family's principles).

Allow your kids to make mistakes. These can be powerful learning experiences.

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.