Parenting is never easy. So many decisions need to be made that can have lasting effects on the values, beliefs and attitudes that your children carry into adult life. There are certain principles that you can practice to give your children a healthy understanding of the value of money, what things cost and how to spend wisely.
The earlier you can teach your child about what things cost and how to manage spending based on costs, the better. Because small children have no idea about money and spending, giving them a small allowance when they are first able to start grasping the concepts of cost is a great way to get them started on becoming good money managers. Depending on the intellectual development of your child, five is a good age to introduce an allowance. The longer you wait to introduce them to the concept of money and cost, the harder it will be for them to grasp it.
Divide the Allowance
Giving your child money without stipulations will result in their developing a selfish spending pattern. One way to avoid this is by physically dividing up the money when it is given. For instance, you can supply your child with three piggy banks, into which they can divide the allowance. Each of the three banks should carry a spending designation, one for spending, one for saving and one for sharing. This way they learn to budget money and allot it wisely, even if it is at a very rudimentary level.
Keep It Modest
You want to teach your child the value of the dollar. At the same time, you don’t want to promote the idea that money comes cheaply. If you are starting early, age five let’s say, give your child a reasonable allowance. You can measure this by looking at their wants and your income level. Keeping it around $3 a week to start makes sense if it fits your budget, because it’s easily dividable in to threes and it doesn’t allow for unbridled spending by your child.
As an alternate to the three piggy bank idea, open a savings account for your child. Talk to them about ways that they can use the money in the account; part of it for spending, part for sharing and part for giving. Opening an account will help bolster your child’s self-esteem and it’s one of the little things you can do to help in their maturation process.
Money doesn’t grow on trees. Adults usually have to work for the money they have; therefore money is naturally tied to some effort. Children haven’t had the life experience to make that connection yet. By giving them a reasonable list of chores to do around the house, they will eventually be able to understand the value of the money they earn. In most cases, this value teaching gets easier the older the child gets. Earning their allowance is not a prerequisite, but it is a good way to help them understand the value of a dollar.