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How To Teach Your Kids To Manage Money

Oct03

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By Mir Kamin of Woulda Coulda Shoulda
1. Don’t buy them everything they want.
Talk early and often about the difference between “wants” and “needs,” and make it clear that you’ll meet their needs, but that nobody gets everything they want. (Adding a story about your miserable childhood, walking uphill four miles to school in a blizzard with no shoes, is optional.)

2. Give them a modest allowance.

A child who is old enough to count is old enough to get allowance. The amount is up to you, obviously, but it should be an age-appropriate amount where stuff they’ll want will require at least a few weeks of saving to buy. Don’t tie this money to chores, either — normal chores are part of being in a family, not about getting paid.
3. Set parameters and then let them make mistakes.
You can stipulate up front that certain amounts must go into savings and/or be donated, but after that, it’s up to them. If they blow it all on trading cards or chewing gum, oh well. Then when they come begging for a loan for that one thing they simply must have you can nod sympathetically and help them figure out how many weeks until they’ll save enough to buy it. The Bank of Mom doesn’t offer loans.

4. Create opportunities for extra earnings.

Your kids have “regular” chores, already. By all means feel free to offer up those bigger, unpleasant tasks as optional paid jobs — weeding, shoveling snow, whatever they’ll really have to work at to earn those extra bucks — and kick back while they learn the value of a dollar. Everyone wins!

5. Set a good example.

This one should be a no-brainer, but it’s the one people miss the most. You not only have to manage your money responsibly, you have to let them see you do it. That doesn’t mean sitting down together with your checkbook, but it does mean taking them shopping with you and being open about how you decide what to buy. Your explanations can grow as your child does, and with any luck, by high school your kid knows both the rewards of delayed gratification and never to use a credit card unless they have money in the bank to cover it.


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4 Responses to “How To Teach Your Kids To Manage Money”

  1. Sheryl Oct 04 at 3:00 pm Reply Reply

    Two of my kids are pretty good with money. My ten year old even saved up $130 to buy her own DS (not easy when your allowance is only $10 a month, and a bit of that goes to charity. She did a lot of extra chores.) But my youngest is another story. He wants everything he sees. He immediately spends his allowance, and then is miserable and whiny for the rest of the month about all the stuff he can’t have. Fun! I’ve talked with him until I’m blue about it, and I’ve finally started giving him his allowance by the week, instead of by the month, to try and make it last a little longer, but it doesn’t help much. Any suggestions, oh wise Mir?

  2. Mir Kamin
    Mir Oct 04 at 5:08 pm Reply Reply

    Some of that is just age, I think, Sheryl. But I’m a fan of giving weekly (so that it’s more of an everyday thing) over monthly for sure.
    One thing I’ve heard of people using with success is the 24-hour rule, though with gas costing what it does I don’t know if you’ll want to try it. You sit down and have a talk about how he always seems to spend on a whim and you’d like to help him be more thoughtful about his purchases, and say that from now on, anything he wants to buy, he needs to wait 24 hours from declaration to purchase. It may (slowly) help him rethink items.
    Whatever you do, though, I would definitely put a rule in place that the privilege of having your own money to manage is only given to those who are old/mature enough not to WHINE when they’re out of cash. Set up a sanction system where his next allowance is docked (for specific violations) each time he wants to moan and groan about the money he’s already spent. There’s no reason you should have to listen to that. ;)

  3. andi Oct 05 at 1:09 pm Reply Reply

    Love the 5 steps! My kids’ allowance isn’t tied to their responsibilities (ie cleaning their room, their laundry, cleaning up their toys) but is tied to ‘extra’ chores (ie chores that I would normally have to do, dishes, weeding, sweeping etc…). I post job ads stating the chore and the pay rate. If they want to make money then they earn it – the same as I do.

  4. el-e-e Oct 06 at 10:55 am Reply Reply

    I think these economic times are the perfect conduit to begin an allowance system with my four-year-old — who asks for the latest Ben 10 action figures every.day.lately. Gah!
    Thanks for this great starting point, Mir — forwarding to the husband!

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