Children need to learn the value of money as they get older so they can be prepared to earn their own, and to spend it wisely. If children get everything paid for by mom and dad and don’t truly understand what it means to earn an income, and don’t understand the basic concepts of saving and budgeting, their poor money habits can follow them for the rest of their life.
There are many philosophies about how to teach children the value of money, from having them earn their allowance to using money as a reward for good behavior, or taking away their allowance when they act up. Which of these are right and what methods work to give children the best understanding of money and its value?
The bottom line is that there is no one perfect way of teaching children about money and how to save and spend it wisely. Most families find that a combination of approaches work best, and at the same time, talking to children openly and honestly about money and how it works can also be beneficial. Along with these, you might also consider allowing your child to have a part-time job as soon as he or she is old enough and can handle its demands.
If you believe that a child should earn an allowance, you might sit down with him or her and outline all the things they will be required to do in order to get their allowance, such as chores around the house. You might also take away their allowance or reduce it when they misbehave. One drawback to this approach is that a child may decide that the allowance is not worth the requirements and may neglect their chores or act out anyway, because they don’t care about getting their money.
Moreover paying a child for good grades and other behavior might backfire because it may not teach them the value of money, but may be seen as a bribe or demand they put upon you for good behavior. A child should be expected to behave a certain way simply because those are the expectations of the house; constantly rewarding them for good behavior may make them expect a reward every time they behave as they should. They may not learn the value of money or of proper behavior this way.
Talking to your children about money and allowing them to work out how they want to spend it can teach them its value. As you give them an allowance or as they earn their own money, sit them down and discuss with them why it’s good to save; talk about the things they should save for, such as new clothes, a Mother’s Day gift, concert tickets, and so on. Walk them through a savings account and let them see it grow with every deposit. This can help them to better understand the value of saving money and managing it properly.