Money Management for Kids

Teaching the value of money is crucial to many parents but even more so to children. So many children do not understand the concept of money management. When those same kids hit early adult years, they are lost. For the most part they figure if they have money in their pockets than they are in good shape. One of the greatest gifts you can give your child is the knowledge of how to earn, budget and manage their finances.

Giving your child an allowance is a good way to teach them how to manage money. Teaching money management to kids is an essential component of daily life to assure that your child is ready for the financial world that they will soon face.

You must determine how the allowance will be earned, distributed and used. Everyone has different ideas as to how allowances should work. Obviously you must decide but below are a few suggestions.

1. The path of least resistance is to give your child an allowance and expect nothing in return. Some parents feel that their child’s only job should be going to school and being a kid. Hence they receive an allowance without earning it. That can work but you will need to make sure they do some chores regardless and outside of allowance. Children growing up with no responsibility and no obligations tend to carry that attitude into their adult lives. Even if you firmly believe that a child’s life should only be filled with fun and education, you will still want to make sure they learn life is filled with responsibilities and everyone has them, with no exceptions. They also need to learn how to budget their money by saving some and spending the rest.

2. Some parents feel that nothing in this world is free and an allowance should not be either. The child is required to complete certain chores in order to earn their allowance. Very few children are not motivated by money. Motivation is a good course in the direction of accomplishments.  Children who have their eye on a prize can ask the parents for possibility of earning extra money but completing additional chores.  This method can help the parents by getting those odd jobs done around the house that are put off until last and can teach the child the value of a job well done.  If they do the job well, they get paid.

3. Another option is the parent assigns each chore a specific amount of money. Then the child is allowed to choose the chores that they want to complete. The more chores they do the more money that they make. This method is similar to real life in that those who work harder and longer typically make more money. This method allows children to set goals and plan to achieve them.

Now that your child receives an allowance it is important to teach them how to manage it. Incorporate teaching money management through allowances into everyday life. Show them items that are similar to the one they want to purchase that are on sale.  Require them to leave the store and think about if they really want that item, to teach them delayed gratification.  Don't let them take their allowance with them every time they leave the house.  There are many different tips to help your child manage their money.  The trick is to find what works for you and your child.