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With the arrival of a new school
year comes an increased focus on children. Many families are busy
buying new clothes, shoes, book bags and school supplies. Then when
school starts, there will be more expenses: school lunches,
after-school snacks, fees for extracurricular activities – the list
goes on and on. It’s obviously a very expensive time of year.
Since these expenses are related
to children, this is a great time to begin helping them learn to
handle money. From a very early age, children start using money, so
why not help them learn to use it wisely?
Start by taking a look at where children get their
money. Usually this is from one of three general sources: cash
gifts, earnings and allowances. Each of these can be used to teach
children money management skills.
EARNINGS AND GIFTS
Cash gifts, often
received on birthdays and holidays, are “surprise” money and
shouldn’t be included as a part of day-to-day expense money.
Children should be given leeway to spend it as they wish. However,
parents can discuss with children ideas for how the money can be
used.
Earnings may be at home
or from jobs outside of the home. Many children are paid money for
extra work they do around the house. The amount received for various
tasks should be agreed upon by the parents and the child.
When children are old
enough to work outside the home, they still need guidance in money
management. Teens should begin developing longer-term financial
plans and an adult awareness of money, work, time and their own
needs.
ALLOWANCE MONEY
An allowance is a child’s
share of family income and should be used as the child chooses on
certain defined expenses. With an allowance, children can have some
hands-on experience with managing money.
They can plan their
spending and learn to set some money aside for future use.
Allowances can help children learn that money is limited, that
income must first cover needs and that the family’s financial
situation affects the amount of money each member can use.
An allowance should be enough to cover necessary
expenses, leaving some money for the child to spend as he or she
chooses. When starting an allowance, parents should teach children
how to set up a budget or spending plan, keep records and set money
aside for savings. Be sure and gear the information to the age and
ability of each child.
Check out these tips for setting up an allowance:
The amount should be decided after
discussing needs and costs with the child.
List on paper just what expenses the
allowance is to cover.
Encourage regular saving from the
allowance.
Avoid tying the allowance to specific
household chores.
Set a regular time, such as once a year
or every six months, to review together the allowance
guidelines and revise as needed.
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