Remember This When Teaching Your Child about Money (Plus Allowance Recommendations)
The grocery store checkout — that dreadful exodus inviting your child at eye-level to spend, spend, spend. You know you shouldn’t give in, but it makes getting out of the store so much easier — at least at the moment. But when the sugar rush sets in and the dollars start to add up, you wonder if there’s a simpler way to handle the check-out frenzy.
What if the next time you were at the checkout, your child gazed at the rows and rows of candy, thought for a moment, then quietly came to your side without the usual asking, begging, and whining? What if, with just a few changes, your child managed their own money by flexing those pint-sized decision-making muscles?
Teaching your child about money is an essential part of parenting. And while your child’s teacher is sure to show them how to add pennies, dimes, and nickels inside the classroom, it’s real-life skills like spending, saving, giving, and budgeting that happens outside the classroom.
To help your child make sense of money (and to conquer those grocery-store tantrums), remember this one big idea: Your child needs money to learn about money.
From play money as a preschooler to real money as a preteen, the more opportunities your child has to make decisions on how and when to spend, the stronger their financial framework will be. So if you’re ready to raise financially-savvy kids, here are tips for every age and two approaches for handling allowances.
Preschool & Early Elementary Years
With your preschool child, learning about money happens through play. And while there are apps and online games, tangibly holding those dollars and cents is a far more effective way to learn.
- Provide “play” money. Your local dollar store has play money in the toy or school supply section. Purchase several packs, and let your child hold, stack and count it. Even spending play money in a make-believe store strengthens those money muscles. At this age, there’s no need for an exhaustive lesson. Just let them play!
- Talk about money as you go. As you pay the parking meter, reconcile library fines, and grab a quick coffee, talk with your child about how much you spent. Trips through the ATM or your bank’s drive-thru provide opportunities to explain the basics of banking.
- Store your child’s real money in a see-thru container. Young children have trouble with abstract concepts. Seeing real money grow as they add to it or shrink as they spend is a visual lesson in the ebb and flow of money management.
- Keep a few dollars of your child’s money with you. While out shopping, allow your child to decide if they want to spend their money. If so, ask the cashier to complete a separate transaction and have your child physically pay.
Upper Elementary & Middle School Years
In these years, it’s time to broaden your child’s understanding and help them see that money is for more than movies, candy, and the latest video game. Begin to discuss saving for larger-priced items like summer camp, a cell phone (with monthly fees), and even a car.
Chores & Allowances
If chores are a part of your child’s daily routine, you’re off to a great start. It may be time to reward your child’s hard work with a weekly allowance. But how much allowance is the right amount?
“The average American family pays approximately 50 cents per week for each year of a child’s age. For example, a 10-year-old would get $5 per week. Another often-quoted allowance figure is $1 per week for each year of the child’s age, so an 8-year-old would receive $8 per week.”
Another school of thought doesn’t tie allowance to age but instead, pays by the job.
“A better approach may be to tailor the allowance to what’s being done to earn it. For example, instead of giving each child a fixed amount of money each week, you could create a chart that assigns a set dollar amount to specific chores. Washing the family car, for instance, could be worth $15 while taking out the trash could be worth $2,” personal finance expert, Rebecca Lake said.
More Tips for Preteens
No matter which approach you choose, here are a few more tips for your 9 to 13-year-old child:
- Set clear expectations. What will you pay for? What will your child pay for? Set clear expectations, so everyone is on the same page. Clear guidelines mean less conflict with your pre-teen over money. Involve your child in this discussion and create a clear plan.
- Don’t swoop in. Resist the urge to swoop in and rescue your child if they run out of money before the next payday or job. Learning to budget, plan for upcoming events, and save for big purchases will serve them in the long run — even if they have to pass on an outing with friends.
- Continue the conversation. As you shop for groceries or clothing, point out prices. If you choose a product because of a lower price, tell them. As they see you wrestle with simple money decisions, they’ll understand that managing money is all about making decisions.
- Consider at-home banking for spending, saving, and giving. Using jars, envelopes, specially-designed piggy banks, or apps, divide your child’s money into categories. A helpful guide is 50% spend, 40% save, and 10% give/share.
- Encourage entrepreneurship. Many children love the idea of working hard to earn money — and not just for you. Encourage your child to work for others by mowing lawns, babysitting, pet-sitting. Opportunities are all around for your child to earn money and even start a business.
A Good Investment
As you do the hard work of keeping quiet when your child wants to spend their money, you’ll see a good return on your investment. As they move from childhood to adulthood, those decision-making muscles will be tone, that savings account will be healthy, and you’ll be proud of your child’s financial savvy.