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Allowance, Values and Responsibility

(Inoculate your child against the over-spending bug)

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May 2006

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bulletThe Seattle Times newspaper (April 23, 2006 Look who's whipping out the credit card: high schoolers) quoted a Junior Achievement Worldwide survey which found that 20% of 18 year old high school student have their own credit card. This survey also noted that while 84% of the teens paid off their credit cards each month, only 21% of college students wipe the credit slate clean each month.
bulletWhether it is a quarter or five dollars a week, many families have believed in giving their children an allowance. The actual amount is less important than the values you convey and the lessons you teach when giving a young person money.
bulletIn some families, talking about money is taboo. It simply isn't discussed. Think about when you were growing up and examine your own attitudes and messages you received as a young person about money - ask your spouse to share what the issue of money was like in their family. This is not a discussion about status, it is a discuss about how money can be used as a tool.
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Some financial experts suggest that there are two categories under which a parent can provide money to their children and four categories for children to handle those funds:

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Allowance that is just given, reliably and predictably each month. This method allows the child the opportunity to manage their resources at their own discretion.

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Payment for chores are available for the child to earn extra money. This lets your child learn that through additional work they may achieve their financial goals faster.

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Then there are the ways to encourage you child to divide and use the money to it's best advantage:

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Long term savings: Part of any money your child receives is put aside for the future for some more expensive item that needs multiple savings events. This teaches delayed gratification (a key tool when it comes to college, car and home buying).

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Short term savings: Sometimes that weekly amount is just shy of the purchase goal of buying a less expensive item but one that still needs some time to build up enough money.

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Immediate spending money. This is important for children to satisfy that instant gratification piece where they've worked hard and are able to quickly realize the benefit. (Many people live in this category and rarely experience the delayed gratification of savings.)

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Charitable giving: Incorporating as an ongoing value for your child "sharing the wealth". No matter how large or small the amount, this is a wonderful way for children to learn that giving back to others is a satisfying way of getting back good feelings.

bulletToo young to start you say? Actually these are the perfect years to begin laying that groundwork for your children to handle money and look at their spending power. And if you don't do it - you better believe those banks and marketers out there aren't going to delay much longer.
 
 

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