Strategies to Teach Your Kids To Use Their Allowance Effectively

May 24, 2011 by Alma Walsh

Parents want the best for their children without a doubt. In the GFC (Global Financial Crisis), this has been even more prominent for families and you want to ensure your family has enough money. The question is, how do you as parents make sure your children – who will probably face the same problems that we all experience now – come out on top?

In life, there are no guarantees. Parents though can assist their kids in educating them about finances when things in the world don’t go according to plan.

What do you do? One of the best concepts is by instilling the concept of allowance in your children!

Allowances are weekly/fortnightly/monthly payments to your child to give them financial flexibility.

Now what is the point of allowance? Allowance for kids is used to teach them the concepts of budgeting, saving and learning about the value of money. When we give allowances for kids, we are effectively teaching them how to budget. If they decide to blow all their weekly allowance initially on candy, then so be it! After they have done this, communicate and talk to them why they need to save part of the allowance for something greater than candy. It could be a Lego toy or a video game that costs more.

Allowances for kids have the ability to teach them how to save effectively to prepare them for the future. They could look ahead to invest in property or the share market to bring back a better return.

One basic concept and principle I stand by is to never take away your child’s allowance if they have not behaved well. Let me explain to you.

When we give an allowance to our children, what we want to do is model to them what happens in real-life. Usually we get paid weekly (or fortnightly or monthly). So we get a consistent payment. We may have some bad weeks where we might not perform too well or get complaints from clients.

Now children are going to have bad days or weeks, but don’t penalize them by taking their allowance away. This doesn’t represent what happens in real life. Punish them in other ways such as not allowing television for a week for example.

Allowances for kids is used so they know how to budget properly, so they can start to save and plan ahead for a holiday that may take 12 weeks to save up for. Let them do this so they can experience what it is like to budget for something bigger.

Budgeting and saving are 2 important principles they will need to learn to be more successful with their finances later in the future.

Ultimately, make allowances for kids fun, encourage them to do the best they can.

Let’s begin and invest in our children’s lives. Teaching kids to save money is challenging and enjoyable for your child. Encourage your child to start using money effectively. Kids Allowance Guidelines