Educating Your Child About Money.
“Teaching the child the value of money is a very important life skill,” says clinical psychologist Dr. Lee Hausner, “It's starts when the child is young enough to understand about money which is generally about 7 or 8 and they get an allowance.”
The goal is to teach your child financial responsibility early to set them up for long-term success.
“An allowance should be given in three parts. There's a part that the child can spend immediately. There's a part that you want the child to put in savings so they understand saving and delaying gratification and there's a part that I want the child to give to charity,” says Dr. Hausner, “Giving a gift card that has a limited amount of money and then letting a child go to the store and having to purchase something within the confine of a gift card is another very good technique for a younger child. As a child gets older, in high school, I like a child a clothing allowance so they learn how to budget a fixed amount of money. At that point, they can learn to have a checking account. They ... Read more
The Right Way to Give an Allowance
The right way to give an allowance looks different for every family and can change as a child gets older.
“When should you start giving it? When they can count to ten and they know that money is something you give in exchange for something else,” says educational psychologist Michele Borba, “That said, it's going to be different for each child and a different amount for each family. What you really want to do is sit down and say, "What do you need?" and "What are things I expect you to buy on your own?"”
“So my wife came up with this idea--Why don't we give them a check for their allowance? So what we did was, set up an automatic bill pay account. Every week, they get a check in the mail. It gets them excited to run to the mail and get this check. We take them to the bank, they cash the check, see the check transform into green cash. Then we make them split it up. One-third to charity, one-third to their own savings, and one-third to buy whatever they want with it. Then if they want to use their savings to buy a bigger item, we usually share that cost with them. We'll pay half and they'll pay half. That's how we do it,” says Magnus Hellberg.
“So I like a clean car. I've always liked my car clean and when it comes to having a clean car, I have three options: I can wash it myself, I can bring it to the car wash or I can have one of the kids wash the car,” says founder and CEO, Gregg Murset, “And I will always choose having one of the kids wash the car, and that's not because they do the best job. Because if I bring it to the car wash, they usually do a better job than the kids. But it teaches them some really important things, it teaches them how to do a job, how to do it well, and it also gives them the opportunity to earn money. So that also provides me a teaching opportunity so that I can say, "You know what? If you just did this a little bit better or you wipe this down a little bit more, you'd actually be able to get a two dollar bonus on the car." And that really teaches the kid, "Wow, if I do a good job, and even if I do a better job and if my dad really likes the job, then I'll get a bonus." When kids learn those valuable experiences early on, that's gonna stick with them, that's gonna stick with them in their jobs, it's gonna stick with them in their family life, those kinds of responsibility and accountability characteristics will stick with them for the rest of their lives.”
Avoiding Common Mistakes
It is common to exchange an allowance for completing chores, however educational psychologist Michele Borba says not to use an allowance to encourage your child to finish their chores.
“I really want to urge you not to tie chores in with an allowance. Why? Because chores are where we want our kids to learn teamwork and cooperation. We expect them to lend a hand together. Allowances are what help your child learn financial responsibility. You don't get an allowance for what you do, mom. Don't expect your child to want money for making his bed. Make sure that you teach your child financial responsibility early. It is one of the greatest life skills he will ever have,” says Michele Borba.
Is it appropriate to use an allowance to encourage other types of behavior in your kids? Such as rewarding good grades?
“One of the questions I get asked a lot, sort of quietly, is, "Is it okay to bribe my kids to get good grades?" We know how competitive it is and if parents are very worried that their kids aren't performing at the top levels that they will not have the same kinds of options as kids who are. So often they resort to bribing their kids for grades,” says author and psychologist Madeline Levine, “And while this can work short-term, it's a very bad long-term solution. The whole point of engagement with learning is that your child is intrinsically interested, is that they're motivated themselves to pick up a book to learn more about something, to engage with the world, and that doesn't happen when you're dependent on somebody else to motivate you. So all money does, whether it's for school or for chores around the house, is to say, "The only way that you can be motivated is if I motivate you." And what you really want as a parent is a child who's capable of motivating themselves.”