Allowances are a great way to teach your child to be financially literate, but it’s hard to know how to make it work for you, and then there’s the most common questions, how much should I pay and when should I start? Here are some tips to turn an allowance into a powerful training tool but remember, there is no “right” system for everyone, so feel free to experiment with your own approach but stick to your guns once you and your child have agreed upon a plan.
In last week’s blog, I outlined 13 best practices for teaching kids about money that I recommend to my clients. In this week’s blog I’ll discuss when it’s time to introduce certain concepts and practices as well as outline some valuable allowance tips for parents and important things that each age group should know.
It’s never too early to start teaching your kids the right and wrong ways to manage money. When I was a kid, my parents afforded me a small allowance that grew each year, granted there were associated chores that had to be finished in order to receive my allowance. These days, I hear more and more stories about parents that hand out money like it does grow on trees. How do you think these kids will fend when they grow up and are forced to manage their finances with the idea that money isn’t earned? Or that money doesn’t have to be saved? It’s important to instill knowledge and properly prepare your children early on in life in order to lead them down the path of financial success. Let’s discuss the major ways in which you can influence your child – even at a very young age – to properly manage money.
As we all know, sometimes learning from our mistakes can be the best form of learning. With that said, don’t be a lifeline for them to always fall back on.