I really love this post! It is a guest post by a dear friend!
SHOW ME THE MONEY!
by Pat Polley
There is no better way to teach kids about money than by giving them some of their own. Allowance - music to their ears! Not only is it a great training tool, but also a simple way to bypass the gimmes and the grocery store meltdowns. Though the system is simple, the lessons are rich and long lasting. If this is something you haven't done yet but think you would like to try, then here are some suggestions.
Begin by deciding how much allowance to give each child and how often. If you have more than one child, you may want to give them all the same amount, or you may choose a tiered system based on age. When our kids were young, they were given money weekly. As they got into the teen years, we switched to monthly in order to make it more challenging and give them more money to deal with at one time.
Decide what is expected in return. When we were new parents, we read a lot of books by Dr. Kevin Leman. He recommended giving kids chores and allowance, without necessarily "paying" them for each chore they did. Dave Ramsey advocates a system where chores are given a value and kids earn allowance on a commission basis, thereby solidifying the work / money connection.
Decide what children are expected to use their allowance for. Our kids were given enough money to cover areas like small toy purchases, gum or candy; what I would consider discretionary spending. We still paid for entertainment, at least until our oldest hit the teen years when he began wanting to go to the movies or roller rink each week. This wasn't too big of a deal except that he got awfully thirsty from roller skating - and hungry too! The same thing happened at the movies where the expensive, salty popcorn needed to be washed down with lots of expensive soda pop. That is when our allowance policy changed. We enthusiastically announced to our son that he had just gotten a big raise! His allowance had doubled, and all he had to do was pay for his own entertainment! This gave him a whole new perspective on his spending habits.
Whatever decisions you make regarding allowance, the really important lessons come when kids are given the opportunity to be broke. If the barrel never runs dry, there is nothing to be learned. As a parent, this can be the hardest part of all; letting them make decisions and then letting them live with the decisions they have made. No borrowing from next month, no borrowing from big brother, no whining, no complaining. Ouch!
Wise money management is a skill that is beneficial to everyone. Why not teach it in the safe and loving environment of home in hopes that our children will bypass the pitfalls of poor decision-making?