Kids of elementary school age are becoming aware of the real world around them. They are eager to learn and still believe everything adults tell them. And they want their own money.
For all of those reasons, I suggest that now is the perfect time to start a simple allowance system. This will create wonderful opportunities for you to pass on your values as you closely guide your young children through simple lessons on giving, needs-versus-wants and delaying gratification.
So, how much allowance should a young child receive? The amount depends on your financial situation. Some families set allowance according to age — say, $1 for each year of age. This eliminates questions about when and how much to increase.
At this age, kids do better with close supervision and short time frames, so receiving their allowance weekly is best.
SHOULD IT BE TIED TO CHORES?
Many experts say allowance should absolutely be the payment children receive for doing their chores and assigned jobs. No work, no pay.
Others feel that citizens of the “family community” should share in its income and responsibilities. They say an allowance should not be the payment for chores, but they add that with privilege comes responsibility. Citizens must do chores and jobs because they are part of the community. That’s what good citizens do.
A simple way to teach a child basic money management is to get four jars and label them: “giving,” “long-term savings,” “short-term savings” and “spend now.” Clear plastic containers are best because your child will be able to see how the coins and currency are accumulating, but you won’t worry about the hazards glass containers can present.
“Giving” is money your child gives to charity or church.
“Long-term savings” are for college or something far in the future.
“Short-term savings” are for something significant like a new bike or special toy.
“Spend now” is money your child can spend right away.
Using the four-container system, you may decide on a 10-30-30-30 plan, where 10% is designated for giving and 30% each for long-term, short-term and immediate spending. Or you can do 10-30-40-20. Whatever it is, make it nonnegotiable, and then help your children use their math skills while at the same time developing a habit of managing their money before they spend it,
Last, teach your children, “To whom much is given, much is required!” A simple spending journal is a way that children can become accountable for how and where they spend their money.
The goal of parenting is to help children grow wings to eventually fly away. Building financial confidence in your children’s lives is one important way you can prepare them for the flight.
You may believe that you have lots of time to deal with the letting-go part of parenting. That may be true, but I can tell you from experience that it will be a lot easier if you start now.
Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, “Ask Mary.” Tips can be submitted at tips.everydaycheapskate.com/. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog and the author of the book Debt-Proof Living.