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.

Money Smart Kids Saving Smart

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

Saving Smart

Saving money takes discipline. To make it a habit for life, teach your kids about saving as soon as they have a regular income—i.e. an allowance. Help them understand that all the money they receive is not for spending immediately on candy, toys or games. Kids should learn that they have responsibilities—to them­selves, their loved ones, their future and their com­munity. Teach them that they should save money for several reasons, including emergencies, common expenses (such as birthday gifts or lunch money), future purchases, investing and charity.

The 3 Little Piggy Banks

Some experts recommend kids keep their money in at least three piggy banks—one for spending, one for saving and one for charitable giving. Your kids can use envelopes, plastic baggies or any other containers—as long as there are three separate ones clearly marked and explained. Decide what percentage of your kids' allowance and gift money should go into each bank. A common formula is at least 10 percent for savings, 10 percent for charity and the rest for spending. Whatever formula you use, stick to it. Your kids need consistency to learn the routine.

Save Yourself

Model the behavior you want your kids to exhibit. The older they get, the more they'll notice your methods of saving and spending. Let your kids see that you put off immediate gratification to save for bigger goals, pay credit cards on time or set aside money regularly for retirement or investing.

The Magic of Saving

The payoff of saving is watching your money grow. Remind your kids to keep an eye on their savings. When they get enough coins, let your kids trade them in for bills. When they get five $1 bills, give them a $5 bill, and so on. By making regular deposits, they will see that savings add up.

Make It Official

When your kids have enough money saved, take them to open a savings account at your credit union. Tell them their savings will grow faster and be safer in an interest-bearing account. You could explain that the federal government insures people's money in most banks, credit unions and savings and loans associations for up to $250,000 per account.

Saving Options

Visit your credit union with your kids to find out about the kinds of accounts they can open. Ask about:

Passbook or Statement Account

This basic savings account pays your kids interest. They'll receive their own register or book to record their deposits and track their balance. They can withdraw some or all of their money at any time. A minimum deposit may be required.

Money Market Account

Your kids will earn more interest with this account but have more restrictions. They may need a larger opening deposit and have to keep a higher balance. They can withdraw their money any time, however, and may receive a checkbook with the account.

Certificates of Deposit (CDs)

CDs or timed accounts are beneficial if your kids have a lot of money (e.g. $500 or $1,000) they won't need for a while. They'll earn a relatively high interest rate and won’t be able to withdraw the money without paying a penalty.

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

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.

Money Smart Kids Ages 15-18

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

Ages 15-18

Your teenagers will likely earn money from a part-time job. This is the time to open a checking account. Be sure they know how to keep records and balance their checkbook. Give your teens more responsi­bility for handling money and making decisions. Older teens can shop for school supplies and clothes—with an expanded allowance from you. Control over spending with a dollar limit.  This will force them to make better decisions. For instance they'll soon realize that buying designer brands means fewer items for their money.

Reality Check

All young adults need to learn the cost of everyday life. Work up a realistic list of the expenses your teens would have if they lived alone. Include the cost of groceries, clothing, rent, utilities; car payments, insurance and gas (or public transportation), taxes, healthcare, entertainment, and miscellaneous (car repairs, household supplies, credit card bills, etc.). Then compare this list to your kids' projected income. They'll see how they'll have to budget and possibly cut back on expenses in order to afford everything.

The Cost of Credit

You may consider letting your teens use your credit card, but there are drawbacks.  You have no control over spending and are responsible for paying the bill. You can teach the cost of credit in another way by charging interest on a small loan you give your teens for a relatively costly item, such as a digital camera. Be firm with your kids paying you back with regular payments on time.  This will help them develop good habits. 

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.

Money Smart Kids Ages 11-14

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.
This is an especially important time for learning about money. Your kids will have more cash now, along with the maturity to begin making decisions about how it's handled. Give them control of the money and the room to make mistakes and learn lessons.

More Money, More Responsibility

Increase the amount of your kids' allowance and add the responsibility of paying for school lunches or other needs. Make the allowance large enough to cover their entertainment expenses. Let them decide how these fun-time dollars will be spent movies, video rentals, snacks, bowling with friends. Provide additional decision- making opportunities by setting a spending limit on purchases and letting your kids shop for birthday gifts for others.

Life Lessons

Use more complicated financial situations as opportunities to teach your preteens and teens about money. Let them see how your major financial purchases involve trade-offs. If your family is buying a new computer or car, for example, ask your kids to help you research which one to buy. If you are refi­nancing your house, show them how small differences in interest rates equal big savings.

Earning and Saving

Continue to stress the value of saving. If your kids want something that costs more than you're willing to spend, suggest ways to earn the differ­ence: odd jobs around the house, baby-sitting or washing the neighbors' cars. Give your kids free reign over their spending money, even if they seem careless. They may blow all their earnings on frivolous buys, but when they realize they're broke, they will learn to be more frugal.

Truth in Advertising

Advertisers spend millions of dollars trying to hook young adults on spending—or influence their parents' spending. To prevent your kids from being lured by glitzy ads and fads, talk with them about the ways advertisers make people want to buy. Discuss the fact that ads are often short on facts but use lots of false promises.   In the case of celebrity endorsements, explain that celebrities are paid to sell products they may not even use or like. By learning how ads use the power of persuasion, your kids are less likely to be influenced.

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.

Money Smart Kids Ages 6-10

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

By age 6, your kids will be ready for an allowance. Begin to stress the importance of saving and help them set specific savings goals, such as a computer game or a new bicycle. Start a savings bank at home for your kids and remind them to add to it regularly. When they're ready, usually at age 9, take them to your credit union to open a savings account. Then, take them each month to make a deposit in their account.

Need vs. Want

Help your 6 to 10-year-olds understand the differ­ence between wants and needs. They often find it hard to resist spending all their money at once on things they don't need. Explain that it's fun to indulge in luxuries now and then, but buying stuff on impulse can leave them with no money when some­thing really important comes along.

But Everyone Else Has It!

A common struggle for parents occurs when their kids want everything "all their friends" have. Reinforce the notion that it's OK and even good to be different. Never feel guilty about not giving your kids everything on their wish list. They can definitely live with­out the latest cool toy or trendy sneakers, and probably will soon get over wanting these things— especially if their home is rich in love, respect and affection—the things kids really need.

Get Them Involved

Start involving your kids in real-life lessons about money. Give them a short list of grocery items to buy, but set a spending limit in advance. They can do their shopping while you do yours. Also, include your kids in family discussions about financial matters. For example, have them help you plan the family vacation: Should you camp or stay in motels?

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.

Money Smart Kids - Ages 3-5

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

Ages 3-5

The time to begin teaching money-management skills is whenever your kids start showing curiosity about money. Start by explaining what money is. Money can be defined as anything a group of people accepts in exchange for goods or services. Let your preschoolers handle different coins and bills, and point out the values of each. Show how money is exchanged for other things by playing "store" or "restaurant." Basic math skills are essential to money management, so make sure your kids have a strong math foundation. Play counting games and board games with play money to build math proficiency.

Build Responsibility

When your kids start kindergarten, start talking about adult obligations relating to money. For example, tell them why you go to work every day, and allow them to visit your workplace. Talk about other jobs people have, and point out workers you see (such as wait staff or police officers). Show your kids a check you wrote and explain that it func­tions as payment, just like money. Take them to the credit union and ATM and demonstrate making deposits and withdrawals. Show them your monthly utility bills and how you pay them by writing and mailing a check. At tax time, explain how you have to submit a tax form. All of these activities will form a foundation for your children's money responsibility.

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.