Home & Family
An Allowance Allows Real World Money Lessons
6/3/2013 12:45:58 PM

There are many different schools of thought when it comes to giving children an allowance. Some parents believe an allowance should be tied to household chores; others argue that doing household chores should be viewed as a child’s contribution to the family, not as a money motivator. Some pay out weekly, while others dole out on a monthly basis. Some say five bucks is enough; others say ten.

When it comes to the logistics of allowance, there are no right answers – the method of developing a family allowance is an individual decision that depends on the personal values and beliefs of each family. However, one thing is for certain, according to Christa Comeaux, Assistant Vice President with Lakeside Bank: An allowance should not be viewed simply as a fistful of dollars given to a child to spend impulsively. Instead, she says it should be viewed as an opportunity to teach invaluable skills about money management.

"In the frantic pace of keeping up with kids, work and all the other elements of today’s hectic lifestyles, it’s easy for parents to miss simple ‘teachable moments,’ and an allowance is one of these. Instead of taking advantage of a golden opportunity to teach life lessons, many parents hand over a few dollars here and there when they child asks for it. That money quickly disappears down the hall and out the door, with no discussion about how it is spent – or saved.” Comeaux said.

Research shows that the financial lessons kids learn in their youth usually carry into adulthood. If their parents spend money haphazardly, chances are, their children learn to do the same. "But if they understand that saving and being responsible with their money is important,” says Comeaux, "it’s more likely they’ll develop good money management skills in adulthood. Helping them manage their allowance is a great hand-on way to start them off with a strong foundation.”

When giving children an allowance, Comeaux recommends giving the money in denominations that encourage saving."For example, if the amount is $5, give them five one-dollar bills and encourage that at least one dollar be set aside in savings. Then encourage them to save at least one of those dollars.”

She says the best way to encourage them is to save is take them to the bank so they can open their own bank account as soon as they are old enough. "Have them talk to the banker about how the accounts work and how best to utilize it. It also doesn’t hurt to have the financial representative explain the importance of saving and the function of interest rates. This is also a good time to discuss good debt versus bad, and how to maintain a good credit score. The depth of the conversation will of course depend on the age of the young account holder.”

Opening the account can also help parent and child develop a budget together. If your child loves forty-dollar video games, for example, that can be worked into the budget, just as the parent would work household expenses into the adult budget.

Another aspect of allowance that often goes overlooked is the opportunity to teach charitable giving, Comeaux says. "Establishing an allowance presents an excellent opportunity for parents to teach children how to support causes that they believe in and give back to their communities, which ultimately allows for a larger conversation about personal values,” Comeaux says. "Talk to your children about causes or issues that they consider important. Even little children will have an idea of what’s important to them. Once you’ve had that conversation, search for charities that are in line with what you’ve discussed and show them how to make a contribution to that charity. Whether it’s a donation to their church or the Red Cross, it helps your child realize they are part of a larger community and they can play a role in the welfare of that community. Plus, studies have actually shown that giving is better than receiving. Even a small donated amount can teach a priceless lesson of selflessness.”

For more information about personal finance management, call Lakeside Bank at 474-3766 or visit www.lakesidebanking.com.

Posted by: Kristy Armand | Submit comment | Tell a friend

Categories: Parenting

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