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Teaching Children About Money
When it comes to teaching children about money, what is a parent to do? Some parents don’t teach children about money because they feel it is inappropriate to talk to children about the topic. They also might lack the time or think they don’t have enough money to worry about. Most educators and financial advisors feel, however that parents should take the time regardless of income, and that they should begin when children are young.
In setting goals for the family, it is important that children understand why spending habits could change. For example, maybe the children always have been allowed a special treat at the grocery store and now you’ve identified that as a potential savings area. How can you get the children to buy into the program?
The most important suggestion is that parents develop a consistent approach over time and among the adults involved. Parents who are consistent and who set limits give their children an advantage of growing up with a responsible attitude that can be carried into all areas of life. When do you start teaching your children about money?
When the child can talk in sentences, parents can begin to teach them about earning, spending and saving. The concepts of borrowing and sharing require an understanding of math and the ability to see things from another’s viewpoint. These skills don’t fully develop until several years into elementary school. But that doesn’t mean you shouldn’t begin to talk to children much sooner.
Children may obtain money in the form of cash gifts, allowances, earnings or the dole (giving to the child as the need arises). Cash gifts usually are occasional. The dole leads to little management experience—the money is always there on request.
Receiving an allowance teaches basic money management, promotes independence, encourages communication and provided practice in living on a regular income. Allowances can promote a sense of responsibility, teach the value of money, encourage planning and setting goals and allow children to learn from their mistakes. It forces parents to define what expenses belong to the children, and what spending is allowed and prohibited by family values. Allowances have some disadvantages too. Parents might have trouble deciding what amount of money a child can manage. The allowance also can become a power issue if they lack a united approach to both handling money and parenting children. If linked with household chores, a child might learn that money is the only incentive to do work.
Parents might feel pressured by their children to give an allowance. An allowance doesn’t always work will with teens as a way to teach money management skills, especially if it was not started at a younger age. An allowance system might not always be consistent—parents might forget or not follow through on the agreement. The time devoted to earning money should be taken form children’s leisure time, not from time used to study or perform household tasks.
Earning teaches a sense of freedom and recognition, financial independence, work standards and habits, how to evaluate job alternatives, and the relationship of money, time and energy. But, all family members, including children, should be assigned unpaid tasks to encourage responsibility for household operation. These tasks should be unrelated to tasks for which children are paid. When children get a job outside the home, discuss the responsibility and financial risks, your expectations about how earnings record book to keep track of earnings and expenses incurred (and who paid for these). Explain the break-even point.
Negotiate and renegotiate the level of support that the family is willing to provide children once they begin earning money outside the home. As children move toward financial self-sufficiency, parents gradually begin to withdraw support.
