Introduction:
Teaching children the value of money is important and should start at an early age. Children can learn to save money starting from the age of 5 or 6, and develop their financial habits by the age of 7. Therefore, it’s best to start teaching them as early as possible.
How to Handle Children’s Allowance:
We need to determine what we want our children to learn from the experience of receiving an allowance. Do we want to teach them that “money doesn’t grow on trees”? Do we want to instill responsible financial habits? Or do we want to teach them the power of investing? Honestly, I believe we can do all of these things, and we should, in order to pave the way for their success when they grow up and become independent.
Giving an Allowance:
If you are able to give an allowance to your children and want to show them how most adults earn income, you can assign them tasks at home or other jobs to earn their allowance. Alternatively, you could give them a set amount of money each week or month, regardless of their contributions at home. There’s no right or wrong way – you can even give them a fixed amount and offer them more money for completing tasks. But once you decide, you should be consistent so they can develop habits over time.
Creating a Savings Account:
No matter how you give an allowance, a savings account should be established for children so they can set financial goals and have a place to watch their savings grow. Once they start building their savings, they can use their money to purchase what they desire.
Teaching Children the Concept of Investing:
You can also teach children the concept of investing by actually investing in stocks, bonds, funds, and more in a custodial account. Although investing should be for the long term, you might consider paying small amounts to your children as “returns” so they can understand how money can grow over time.
Teaching Children Money Concepts:
Even if you’re unable to give an allowance, you can still teach your children money concepts. Before you go shopping at the store, have your children participate in budgeting and how to spend money. You can talk about your bills and the spending decisions the family makes. The more they participate, the more financial lessons they can absorb.
– Christine
If you have questions about money, Christine is here to help. Submit an anonymous question and she might answer it in a future article.
Sources:
– Terri Friedline. “A Developmental Perspective on Children’s Economic Agency.” The Journal of Consumer Affairs.
– Money Advice Service. “New Study Confirms Adult Money Habits Are Set By the Age of Seven Years Old.”
Source: https://www.thebalancemoney.com/how-can-we-teach-our-kids-the-value-of-money-6825646
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