Teach your children money management

[BSClay]

I've seen several discussions on here about children knowing the value of money. There are many ways to teach children this value and allowance may be one of them. One of the reasons parents give children allowances is to help them learn how to manage money.

But for it to be a truly effective teaching tool, parents need to spell out what the allowance will cover, how it can be spent, the consequences of overspending, and how much should be saved or given to charity. My children's allowance requires them to have to pay for things they "want" when at the store. Rather than them asking me constantly for little things, I ask them if they have the money for it.

Here are some guidelines:

1. Encourage planning. When deciding how much the stipend should be, consider giving enough to encourage saving or charitable giving. But be careful not to give too much. If the kids can buy anything they want, the allowance fails to teach them how to prioritize and set goals.

2. Set up a payday. Try choosing a day early in the week to encourage kids to plan ahead for weekend expenses.

3. Set limitations and guidelines. If you don’t want them to buy things you don’t want them to have, require that they consult you before making purchases over a specific amount, like $15.

4. Expect mistakes. Children will probably overspend at first. Don’t get angry. Help the child correct his or her mistakes and learn from them.

5. Don’t link the allowance to chores. If allowance is “payment” for chores, children can too easily decide to skip their chores and accept not getting any allowance, which defeats the purpose. Not to mention I've heard the strategy to lower the amount given based on un-done chores. This may have the child end up owing you money.