Talking to your children about money
When helping your kids understand the concept of money and its implications in their lives, the earlier you begin those conversations the better. Your kids are listening to you and looking to you for guidance regardless of their age.
Pre-school children can begin learning basic concepts about money. Simply taking them to the grocery store or pharmacy and talking to them while you shop is a great start. Explain that you are comparing labels/features and prices to be sure you get the best value for your money. Or explain why you’re willing to pay a little more for something unique when it’s necessary. Giving them a small amount of money, say one to two dollars, and helping them review shelf prices and choose a treat that maximizes their money and offers them the greatest sense of satisfaction is another way preschoolers can learn about comparison shopping and the value of a dollar (or two).
As they get a little older, school-age children can be responsible for earning an allowance. Helping your 5-7 year-old child categorize and prioritize expenses for their allowance is a good way to teach responsibility. Give them an appropriate allowance in small denominations. Encourage them to sort the allowance into envelopes with their chosen categories. For example, 50% can go into the Savings envelope; 30% can go into the Spending envelope; and 20% can go into the Donate to Charity envelope.
While we’re on the topic of allowances, let’s answer the two big questions:
- How much money should I give my child per week?
- What should my child do to earn their allowance?
The answers aren’t simple and are unique to each family. However here are a few guidelines that might help you:
- Typically, for young children through tweens, 50-cents to $1 per year of age is a good estimate. Therefore an 8-year-old child would earn $4 – $8 per week. Choose an amount and be consistent. It helps children learn to budget if they have a consistent “paycheck” each week. Teenagers obviously would need more money per week, maybe $2 per year of age per week, plus a part-time job.
- One school of thought on allowances is that children should have a set of chores to do each week to earn their allowance. This is a good way to teach responsibility and the idea that you have to work for what you want. The argument against this approach is that as part of a family children should learn to pitch in and help so the whole family benefits (many hands make light work). If you choose not to pay your child for chores, then define what “extras” they can do to earn their allowance and make it consistent each week. Additionally, many experts advise against using grades as a determinant for allowance, as there are too many outside factors that control whether or not a student has “good grades.”
Every day offers teachable moments, so talk to your kids about what you’re doing and why/how you’re doing it – using coupons, online banking, reading reviews before purchasing, reviewing your budget, comparing labels at the grocery store, repairing rather than buying new, etc. Money should be part of your daily conversations so that your children feel comfortable talking to you about it, rather than making it a big, scary subject.