At the foundation of your children’s financial intelligence should be this undeniable truth: It is not the amount of money you have, but what you do with it that matters. This is true for a child managing a five-dollar-a-week allowance or a corporate executive with a five-thousand dollar-a-week salary.
For many years of my life I didn’t know this truth. On the contrary, I believed that more money was the answer. I was convinced that if we just made more money, won the lottery, or received some unexpected inheritance, all of our money problems would vanish. But the more we made the worse our problems became. Because I didn’t know how to manage what we had, more would have never been enough. We didn’t save, we didn’t give, we didn’t plan, and we had no idea where all the money went.
Unless your children learn simple, wise money management techniques, more money will never be enough.
The simplest way to get started building financial intelligence into your kids’ minds and hearts is by putting them on an allowance and then requiring them to suffer or enjoy the consequences of their financial decision.
An allowance teaches kids about real life
Nothing beats an allowance for a hands-on course in values. Having their own money teaches them about responsibility, consequences, saving and charity.
An allowance helps to distinguish needs from wants
Do they really need that new video game or those peace sign earrings? Having their own money forces kids to think about what to spend it on.
An allowance puts an end to the nickel-and-diming
You create a set budget item called “Kids’ Allowances” and that stops that constant drip, drip, drip of money flowing from your pocket to random stuff for them.
An allowance builds trustworthiness in a child
By giving kids money to manage, you demonstrate that you trust them. And they soon learn that to keep the money coming, they need to become trustworthy.
An allowance promotes self-confidence
Managing money has a magical effect on their self-esteem. Teaching kids how to give some of their allowance to charity, save some for a longterm goal and spend some now gives them the tools of self-reliance.
There are no set rules for when to start. However, I suggest waiting until kids are old enough to manage their money and understand the concept, which is usually around age 6.
How much? Though many families use age to determine the amount ($10 per week or month for a 10-year-old, for example), think about how much money your child needs.
A 6-year-old might only use a few dollars a week for ice cream or toys, while a 12-year-old will probably use more for things like movies, snacks and games.
How often? Whether it’s weekly or monthly, kids do better when you stick to a schedule.
Younger kids tend to manage their money more effectively when they get it weekly, since out of sight often means out of mind.
For older kids, consider paying monthly so they can learn about budgeting.
Work for pay? Think about your goals when it comes to the allowance-for-chores quandary. If your main goal is to teach your kids to manage money, give them a basic allowance with financial “chores” attached, such as paying for their own collectibles. If you also want to teach kids the value of working for pay, pay them for extra chores on a job-by-job basis.
No matter what the amount, encourage kids to save a given percentage, set aside a percentage for charity (they’ll learn the value of giving back), and the freedom to decide how to spend the rest.
Want to get your child’s allowance program off to a great start? Consider the Moonjar Classic Moneybox. This clever savings bank is actually three banks in one to teach children to save, spend and share their allowance.
Over the years Moonjar has received multiple awards for innovation and it’s no wonder. This money box is really well made and easy to use because kids even as young as age 4 years can understand and learn from the process. I believe this durable tin money box is a timeless gift that will inspire and teach children to save, spend and share wisely for a lifetime. About $19.