Of the many lessons we want to teach our kids, money is at the top of the list.
It’s an easy one to forget, so consider Financial Literacy Month your yearly calendar reminder to make money lessons fun for both you and your little ones.
Many experts agree that paying kids for chores expected of them (like making the bed or being nice to siblings) isn’t the best way to handle allowances. A flat dollar amount to match their age, up to a certain point, can take the guesswork out of the equation.
For extra earnings, try having kids take up household jobs parents would typically outsource, suggests Jayne A. Pearl, coauthor of “Kids, Wealth, and Consequences: Ensuring a Responsible Financial Future for the Next Generation.”
This might include paying kids $10 to wash the car, clean the bathroom or weed the garden for an hour, Pearl suggests. Not only will this teach kids about working beyond an allowance, but parents can also save on what they would have paid a professional — provided the kids are old enough to do the job!
“Children learn best through doing and not just discussing processes,” says Ken Damato, CEO of family financial education website DoughMain.com.
To cross over from “learning” to “doing,” he recommends your kids use the money earned toward some of their living expenses (think school lunches, back-to-school clothes, going to the movies with friends, and the like).
“The idea is to allow kids to make some choices and trade-offs,” says Pearl. “They can pack a healthy lunch the night before and save the next day’s school lunch cost. They can find toiletries and clothes on sale and save the extra. This gives them an incentive to shop smartly, and can encourage them to set their own goals for saving up for things they value.”
Instead of focusing only on how to earn, encourage kids to think about what they want to do with money once they get it.
Convey both incentives and goals, Pearl says. “When they finally earn and save enough to buy the item, the child will feel a huge sense of accomplishment.”
Damato suggests having kids keep a wish list that can be referred back to when they have some cash saved up — or when they’re tempted by an impulse-buy.
“Window shopping also provides an opportunity to discuss all of the consumer products that we’d love to have while also helping your child realize needs versus wants,” he says.
For families with multiple children, saving for a big-ticket item — like a play set or trampoline — can make the process fun, teach accountability and encourage them to work together to pool their money.
Pearl suggests that each child contribute a set percentage of his or her allowance. Parents can kick in a set portion, too.
“It’s important to decide in advance how long it will take for the savers to achieve the goal when they contribute their weekly portion of savings, and consequences if one or more kids blows their allowance on something else,” she says. This can get kids in the long-term planning frame of mind.
This exercise teaches delaying gratification, too. For instance, let’s say the kids and parents agree on a trampoline that costs $250, and the parents commit to paying half. The two children, ages 10 and 12, receive $10 and $12 each for a weekly allowance. They then decide to contribute 25% of what they earn each week to the goal — $5.50 between them.
As the savings pool grows, the whole family can get excited about the purchase, which can be timed to align with school letting out or the start of summer.
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