Allowance Tips: Good Money Management Begins with an
Allowance
 
The best tool parents
have for teaching financial responsibility is an allowance. Even very
young children should have discretionary funds to spend as they see fit.
Saving, decision-making, planning, sharing, charity, and responsibility
are just some of the lessons that can be taught through an allowance.
What is an allowance?
It's important to
clarify that an allowance isn't money a child earns for doing chores.
Children should have age-appropriate tasks they're expected to do
without pay simply because they are members of a family.
An allowance is part of
the parents' responsibility to meet the needs of the family. The amount
of the allowance depends on the child's age and the parents' income. It
should be adequate to meet the child's needs but not necessarily every
want. Perhaps the most important benefit of an allowance is learning to
develop independent thought. Expect children to do some unexpected
things with their money, but allow them to make their own mistakes. The
important thing is not to rescue them with more money. Help them work
through their own solutions.
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We suggest the
following tips for teaching financial responsibility:
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Teach
philanthropy at an early age.
A portion of a child's allowance — 10 percent — should be allocated
to charity. Encourage children to participate in canned good,
clothing, or toy drives for charities. Help them to respond to
natural disasters, such as hurricanes or earthquakes, outside their
community by donating money to help. Check into charities for
animals and young children. A great way to teach them to save
money is to create a Caring Can. Take an old coffee can and
create a label for it "Caring Can". Have your child put a
portion of their allowance in the can each week/month. The
rule must be that no matter how pressing other financial needs may
be the money must go into the can. Secondly, the money should
have to go some place that could help better the world. Once a
substantial amount of money has accumulated have them decide where
they would like to donate it. Let them research and decide on
an institution so that they will be happy donating.

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Teach saving at
an early age.
It's important to put something aside for the future. Teach your
children that saving isn't for leftover money. Both the allocations
for charity and savings should be made before any discretionary
spending takes place. As with the donations to charity suggested
above, the child should be encouraged to set aside the same portion
of allowance — 10 percent — for savings. Children should have
savings accounts by the time they're 8 years old. If older children
don't have savings accounts, remember it's never too late to start a
savings account for a child.
-
Encourage an
entrepreneurial spirit.
If children have a special goal, encourage them to find ways to earn
the necessary funds. Don't create unnecessary jobs just so they can
meet the goal. That's the same as giving them the money. Let them
find a job and make the offer. If it meets a need and the price is
right, hire them.

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Never reward
good behavior with tangible gifts.
Goodness is its own reward. Your approval and words of praise should
be sufficient. Paying for good behavior leaves parents open for
juvenile blackmail. Parents don't want to hear, "I'll stop crying if
you take me to the toy store," or "I'll come home on time if you buy
me a new stereo."
Teaching children
financial responsibility can be an exciting and fun-filled experience.
It's not always easy, but when parents are consistent, the rewards are
immeasurable. Parents will be giving their children skills that will
benefit them for the rest of their lives.

This
article was excerpted from National PTA's magazine, Our Children.
Compliments of life.familyeducation.com
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