Money Management 101 for the Grade School Set: Allowance

Kids have a natural interest in money. They love counting it and stacking it. They love carrying it in a plastic baggie to the dollar store. You can encourage this natural interest and also teach your children valuable lessons on how to manage money by giving them an allowance.

Allowances give kids real-life training in spending, saving and making financial choices before they become adults – when the stakes are much higher. With your guidance, an allowance can help develop good money management habits in your kids while they are young that they can carry into adulthood.

There are many ways to set up an allowance. How much should you pay? How often? Should you require chores to earn allowance? Every family must decide what is right for them.

Allowance 101

Start Young- As soon as your child can understand the basic value of different coins and bills he can handle an allowance.
Agree to ground rules – Set up guidelines for the allowance. For example, how often will it be paid, what extras should be paid for with allowance, what happens when allowance runs out.
Give them free rein – As parents it’s so tempting to “guide” a child towards or away from a purchase. Don’t. Let them make allowance decisions on their own – they learn by experience… good and bad.

Check into some of the links listed here for suggestions and ideas on the many ways you can do allowance.

www.kidsmoney.org/allow.htm
www.familyeducation.com
www.practicalmoneyskills.com