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Parents, do you give your kids an allowance? It's a hot topic to know how much to give, and how to teach kids about managing that money responsibly. Nanette Graviet from Mountain America Credit Union has these ideas.
Why is an allowance a good idea for kids?
• If your kids are getting to the age when they're ready to learn about money, it may be up to you to provide the "teaching materials," so to speak. Most kids in America get some form of allowance, but how much differs from family to family. A study from the American Institute of CPAs tried to find out what the average amount is, and what parents are teaching their kids about money.
• Still, money as a topic of conversation is not a top priority, the survey found. Just 81 percent of all parents surveyed - including those who don't give their child an allowance - said teaching their son or daughter how to properly manage their money was a priority. That may sound like a lot, but consider that 95 percent said it was important to talk about eating healthy, and 87 percent said conversations about good grades were the norm. The best thing parents can do for their kids when it comes to financial responsibility is to talk about it openly and honestly. There are a lot of ways to broach the subject, from discussions about saving for a family vacation, to finding deals on back-to-school items, to the cost of household utilities.
What can my kids learn from having an allowance?
• You kids can learn valuable lessons about banking basics, budgeting, and saving.
• Start a conversation about financial responsibility. Parents need to instill in their kids a respect for the value of money by setting guidelines for both spending and earning money, the AICPA suggested. If your kids know how much work is required to pay for games, clothes and food, they might be less likely to drain their online checking account buying unnecessary items.
What is an appropriate age to begin?
• There are many variables when it comes to allotting allowances, with the biggest factor being age. You may love your kids, but there's not much a 3-year-old can do with $20. Many parents begin giving their kids an allowance around age 8.
How much allowance should my child receive?
• Depending on how old the child is, the average monthly allowance is about $65. But parents are wise and know they shouldn't just give their money away. In fact, about nine out of 10 parents who give their kids an allowance make them work for it for at least one hour per week. The average child, however, does 6.2 hours of chores every week to earn his or her spending money.
How can I teach a teen how to use their allowance wisely?
• Here are some ways you can teach your youth wise use of their allowance:
o Consider giving out a monthly, rather than weekly, allowance. Tell your teen that the money must last for the whole month, and encourage him or her to keep track of what's been spent.
o Encourage your teen to think spending decisions through rather than buying items right away. Show your teen how comparing prices or waiting for an item to go on sale can save him or her money.
o Suggest ways your teen can earn more money or cut back on expenses (e.g., rent a DVD to watch with friends rather than go to the movies) to resolve a budget shortfall.
o Show your teen how to modify a budget by categorizing expenses as needs (expenses that are unavoidable) and wants (expenses that could be cut if necessary).
o Have your teen put savings goals in writing to make them more concrete.
o Encourage your child to set goals that are based on his or her values, not on keeping up with what other teens have or want.
o Motivate your child by offering to match what he or she saves towards a long-term goal. For instance, for every dollar your child sets aside for college, you might contribute 50 cents or 1 dollar.
o Consider increasing your teen's allowance if he or she is too young to get a part-time job.
o Praise your teen for showing responsibility when he or she reaches a financial goal. Teens still look for, and count on, their parent's approval.
o Resist the temptation to bail your teen out. If your teen can depend on you to come up with extra cash, he or she will never learn to manage money wisely. But don't be judgmental--your teen will inevitably make some spending mistakes along the way. Your child should know that he or she can always come to you for information, support, and advice.
o Open up a savings account for your child if you haven't already done so.
You can always find more great ideas and activities for your kids by going to MACU.com.
