All kids need money. Whether it’s a weekly allowance or a payday for chores done, kids need the responsibility and satisfaction of knowing how to handle their own money. Some parents have strong feelings that children should have to earn their money by cleaning their room and picking up their clothes. Other families believe that basic household chores are just part of being a family and kids should learn that the job well done is its own reward.
Whatever your feelings about children and allowance, I still feel that there are reasons why every child should have access to making some financial decisions while they are very young. Then, as they grow, their understanding will develop and they will be able to make clear responsible financial choices as adults.
Savings is non-negotiable: Every family should have variations of this lesson being taught. When the children are given free money (think birthdays, Christmas, special gifts), they should know that some of it goes straight to savings.
Divide in half: Any money the children receive gets divided in half. One half goes straight into their savings account and the rest gets put in their personal, spendable bank. This is a rule that the kids may not like right now, but it is teaching a long term lesson. Savings needs to be non-negotiable. When they turn 18, they will have money waiting for them that they have saved all their life for.
Three piles variation: One pile goes to the tithe (or donation to a charity), one pile goes to savings and one to spend. Give them room to splurge — but not permission to bomb!
When our kids want to splurge on something, it’s time to talk. Kids have a different perspective on what is cool. There may be a special promotion at their school, or a toy they really want. We usually can tell when something has caught their attention. The kids will take their bank, dump it on the floor and start counting.
As a family, we talk about the item they want to buy. Then we look at all the options. Is it cheaper on eBay or Amazon? Can they get a better deal if they wait a few weeks? Once they have studied the options, if they still want to buy the item, we give them the option of buying that item. But we never let them wipe out their bank. We don’t want them to have a $0 balance. It takes too long to fill that bank.
Teach the value of a dollar: When the kids see an advertisement for something they like, we talk about how much that item costs. We then try to put it in perspective. How many weeks will it take to save enough money for that item? They know what their weekly allowance is. Is something really worth 10 weeks of their allowance?
Free online banking experience — Mykidsbank.org: My Kids Bank lets you sign up for a free account. You don’t enter any real information and you are not tracking a real bank account. But you can set up the details of a bank account, including the interest you want to earn, adding deposits, tracking withdrawals and automatic deposits.
Kids Saving Money Writing & Coloring Contest: Kids can share their knowledge about saving money and get a shot at winning some great prizes. Kids ages 3-5 can submit a coloring page. Kids ages 6-12 can write a five-sentence (max 250 words) short essay about ways to save money. http://hobbiesonabudget.com/2012/03/23/saving-money-kids-writing-contest/.
Entry deadline Monday.