Being aware of money
Money is a subject that is difficult for many families. Husbands and wives may not agree about their family's financial strategies, so talking to their kids about money opens up an uncomfortable subject. Helping your children learn about money may be something you would like to leave "until they are old enough to understand." But if you wait until your children leave home for college or a job, you will put them at a big disadvantage. Living on their own means they will be taking on new responsibilities managing their expenses along with experiencing a new school or work-related pressures, all at once.
If you are hoping that they will learn about money management without your help, at school perhaps, that is unlikely. A class in personal finance used to be a graduation requirement for Oregon students - teenagers were taught about banking, saving, credit, and budgeting. Since the requirement was eliminated several years ago, only a few high schools still have this offering. Some of this content is covered during junior or senior year economics courses, but the practical, day-to-day lessons of dollars and cents may not be included.
So the responsibility to develop a good foundation in money management rests squarely on your shoulders. Your children's education about money should include the concepts of earning, spending, saving, borrowing, and sharing. But before you begin, you may want to consider these questions:
- Can our family discuss money issues openly, without conflict? What issues do we as parents need to resolve to be able to do so?
- How should our children "earn" money - through allowances or another method?
- What are our family values and attitudes about money? What do our children observe about our values and attitudes? What do we want to communicate?
- How might our children each be different with regard to handling money? How will we deal with these differences?
By learning about money, children are also given the opportunity to formulate their own values about income, life style, and work. This can be a powerful motivator in their education and career planning. As they identify their life style choices, they can connect career options that can meet their future needs. They will see that income is related to level of education, and they may make better choices about their education plans.
Money and young children
Although children rarely learn to understand the value of money until they are much older, it does help them if your family can talk about money and the concept of a family budget together. They need to learn that there is a certain amount of money that comes into your household and that there are expenses, such as food, shelter, and clothing, that must be paid. You don't want to worry your children about the bills or make them feel guilty that they "cost you too much." You do want to teach them the basics about income and expenses.
Do we really need to discuss money so early?
Most experts agree that when it comes to teaching kids about money, the sooner the better. By observing their parents, children become aware of money, and unless otherwise informed will believe that money "comes out of the ATM machine." Helping them learn that money is earned by working will go a long way to creating a sense of responsibility about handling money and the knowledge that is doesn't "grow on trees."
Once children learn how money works, they often display an instinctive conservatism. They may hoard every penny and nickel. Early on you have the opportunity for teaching about saving, in a piggy bank and even in a bank account that earns interest. You have the chance to discuss spending and talking about what the money can buy. You might set up a "family piggy bank" to illustrate what it is to save for something fun for the whole family. Once your children are teenagers, they are less likely to listen to your advice, so take advantage of their interest at a young age.
No matter the age of your children, they can be part of a family meeting to decide how some of the discretionary income is to be spent. Having a part in the decision making will help them understand the value of money and that there are often limits on spending so some purchases must be deferred.
How do allowances fit in?
There is no right or wrong way to give your children money. There are no simple answers about how much money children should get. It depends - upon your family's values, circumstances, age, and expectations.
Although children can get money in different ways, most experts agree that beginning to have money at an early age - by the time they are starting school and can count it - is important for learning about money. When children are young, having small amounts of money to manage helps them prepare for the day when the amounts get much bigger.
Most experts also believe that allowances can be an important teaching tool. However, they are quick to caution against tying allowances to either chores or achievements. Allowances are for learning about financial responsibility; chores are for learning about family responsibility; getting good grades is about personal responsibility.
Here are some common tips to help with allowances for your children:
- Since allowances are to learn money management, have discussions about what the allowance is for and teach ways to budget it. Help them plan their spending and set goals for saving. Talk about the choices they need to make. Include discussions about giving to charity.
- Especially when your children are young, don't expect them to save for something in the distant future or manage their money over of full month for essentials.
- Give the allowance regularly, for example on the same day each week.
- Let your children learn from their mistakes. Don't control their spending. Don't punish them for their mistakes.
- Increase their allowances over time if possible. Recognize their increased needs and good money management.
- Never use their allowances as a bargaining tool for good behavior, achievements in school, performance in sports, or as a bribe.
- Since allowances are not in payment for chores, feel free to provide opportunities for your children to earn extra money by doing special jobs around the house.
- If your child has a goal and needs some additional help reaching it, don't worry about helping with extraordinary spending needs.