Would You Give Your Kids an Allowance?
Believe it or not, receiving an allowance is not the source of kids not valuing money.
For the most part, a large portion of our financial literacy stems from our parents and seeing how they handled money. Money habits are formed as early as age 7. There’s an ongoing debate with this topic of allowance. Some say it teaches kids financial responsibility, while others seem to argue that simply awarding an allowance in exchange for doing chores around the house or some other work instills nothing in children about managing money. The latter believes just having honest conversations about money and finances with your kids is a better solution.
The average allowance is about $11 per week, which is about $570 per year. If your child is consistently out of money in a few days, how do you then teach them the value and importance of saving so they don’t always end up “broke” and potentially asking you for more money at the end of the week? Understand being “broke” is temporary, being “poor” is a money block that requires a mindset shift. Being poor or in poverty will keep you enslaved. Be conscious of the words you’re using around your kids.
Touch of a Finger
Part of the modern challenge in teaching kids about money is that cash isn’t king anymore. Today, we use credit and debit cards for the majority of our spending – and there seems to be an ever-increasing movement toward online shopping and making payments with your phone using any of the apps that are available.
This is great for the way we live our modern, fast-paced lives, but what if technology could help us teach more complex financial concepts than a simple allowance can – concepts like how compound interest on savings works, or what interest costs for debt look like? As it happens, a new breed of personal finance apps for families promises this kind of functionality. Just look at your app store!
And there’s nothing wrong with using an excel spreadsheet too for budgeting. When you set your monthly budget or have your money dates, sit together as a family with your kids and walk them through it as well. Make it fun, have popcorn with extra butter or some ice cream. The more exposure they have to managing their expenditures from an early age, the more this habit will get engrained into their subconscious mind.
If an allowance can teach kids about saving, compound interest, loan interest, and budgeting – with a little help from technology – perhaps the two sides of the allowance debate can finally agree. Now, whether your kid’s allowance should be paid upon completion of chores or not… Well, that’s up to you and how long your Saturday to-do list is!