Teaching with an Allowance
All of us have attitudes and feelings about money that are based on the observations and experiences that we had as children. Since parents can have a great deal of influence on their own childrens attitudes and skills related to money, it is important to give some thought to what you want to teach your children about earning, spending, saving, sharing, and even borrowing money.
There is no right or wrong way to provide children with money. Each method has advantages and disadvantages. What you want to teach your children about money and your particular family financial situation will direct the method that works best. Of all the methods available, an allowance can be one of the best for teaching lessons on money management.
An allowance usually means giving a child a specific amount of money on a regular basis although in many households children are required to earn at least a portion of their allowance. An allowance helps promote a sense of responsibility and independence, and provides the experience of living within a regular income. It can create an atmosphere to encourage planning and setting goals. To maximize the learning potential of an allowance, parents need to sit down and discuss with each child exactly what their allowance is expected to cover. As children get older, an allowance may get larger but so does the list of expenses it is expected to cover. The amount of money you give a child should be large enough to provide at least a little money where the child can make decisions about its use. Learning from their choices, both the good and poor choices, is an invaluable lesson as children develop their own attitudes and understandings of money.
Also See: K-State Research & Extension publication Money Wise: Helping Children to Manage Money