One of the best ways you can introduce money management skills to your kids is by setting up some sort of allowance on a weekly or monthly basis. Healthy financial habits can begin at a young age as money is going to be a part of your children’s lives no matter what, beginning the discussion sooner rather than later will allow for your kids to learn while you are still there to guide them. Learn more about three different techniques you could implement with your family if you are looking to start an allowance plan for your kids.
1. The “Unconditional” Allowance
This method consists of giving the child a regular amount of money on a timely basis without requiring the child to complete any chores. The allowance acts almost as a paycheck to the child, they start to understand receiving a set amount of money and making it last until the next allowance comes. The downside to this option is your child won’t understand that in the real world, money doesn’t just get handed to you.
2. The “Pay as Needed” Allowance
Sometimes your kids don’t need a set amount of money to get them through the week. The “pay as needed” method makes your kids come to you when they need money. Your child is still not completing anything in order to receive the allowance, so it is important to tell them how you work for the money that you are giving to them. When your child asks you for money, make sure you aren’t just handing them some cash to keep them happy. Take this time to talk about where that money comes from and ask how the child plans to spend the cash.
3. The “Earn Money for Chores” Allowance
This option is the most common plan for families to follow. Kids are asked to complete certain chores around the house and in return, they would receive an agreed upon set of money. The reason this option is the most popular is because your child will see a direct correlation between work and money. It is important to be strict, if your child doesn’t complete their assigned chores, they will not receive their allowance for that week. Your child will learn the value of money and will hopefully be more aware of how she spends her weekly allowance.
If you know your child is looking to save up for a bigger purchase, don’t let this influence how much each allowance adds up to. One of the best lessons your child can learn from her allowance is the art of saving. Teaching them the benefits of putting aside money will stick with them for the rest of their lives. Don’t be afraid to show them how you, as a parent, save your own money and introduce them to the difference between a high-yield savings account and a rewards checking account.