How do you teach your kids the value of a dollar? I remember a recent conversation with a friend of mine. She was adamant that giving kids an allowance was something she would NEVER do. Why should she pay her children to do things they should be doing anyways? She made a valid point. But I can also see the reasons why a parent might offer their children allowances. It helps teach them the value of a dollar, and makes them understand they need to work to earn money. It does not just magically appear in bank accounts and wallets.
Learning the Value of Money Through Hard Work
My oldest child is 13 years old. This summer, he asked for my husband and me to purchase him a season pass to Water World. They are somewhere around $120 for an individual season’s pass. I told him we would have to think about it. I wanted more than anything to just say yes, but I knew that he would need to understand how hard his dad and I have to work for $120. I told him that we would buy him the season pass on one condition. He would have to contribute as much of his own money as he had. We would make up the difference.
At the time, he only had around $20 saved. Later, a neighbor asked if my son would be willing to spend a few hours doing some yard work. He was eager–he wanted the extra money. So he set off to do some very aggressive weeding on one of the hottest days of the year. He returned home five hours later with $60 in his pocket. I reminded him of our agreement–he would need to contribute all of the $60 he earned doing yard work that day, plus the $20 he had saved. It was amazing how quickly he changed his mind about the season pass. Once it was the money HE worked hard to earn, he was eager to reconsider his desire to spend a few days this summer at the water park. I guess that means I totally win at parenting.
Teaching Kids About Money
The value of the U.S. dollar is something that is always fluctuating. Currently, the dollar is worth 25% less than it was in 2014 according to the Consumer Price Index. I don’t expect my kids to understand inflation and the subtleties that contribute to the fluctuating value of the U.S. dollar in the global marketplace. I DO, however, expect them to understand that everything has a price.
2-5 Years Old
There are some ways to teach kids as young as two about money. While a two-year-old won’t really be able to comprehend fiscal responsibility and how currency works, you can begin to teach them the names of coins. Playing “Store” is another valuable way of teaching younger children about buying.
6-8 Years Old
By age 6, children usually have a greater understanding of the concept of money. A great way of teaching children this age the value of money is to open a savings account for them. Teach them to make regular deposits, whether it is with the $20 grandma sent for a birthday or a regular allowance. You can also use this opportunity to discuss interest on the account as they get a little older.
9-12 Years Old
Comparison shopping is a great tool to teach children the value of money. Teach children to read shelf tags at the grocery store and compare the bulk price per cent on items. It is also a good time to teach about quality vs. quantity. Sure, they might get more store-brand paper towels for less money, but if you have to use twice as many to achieve the same result you do not end up saving any money. Take a few moments each week on grocery or shopping trips to purchase a store brand vs. name brand product. Involve your child in a simple experiment to determine if the quality of a product is worth the price.
13-15 Years Old
The early teen years are rife with challenges for both parents and adults. This is a great time to teach teens about budgeting. If your child gets an allowance, show them how to budget it and teach them the difference between wants vs. needs.
16 and Older
Start teaching older children about credit as well as donations and charity. When teens go off to college, they are often subject to credit card promotions and offers for students. I have known too many students who got themselves into financial trouble once they began opening credit card accounts. They had very little knowledge as to how to use them. Teach them early by using reloadable credit cards. This is a great way to help them understand the ins and outs of credit. Parents can load the cards with an entire month’s worth of allowance. Show them how to budget and manage that money over the course of the month. This will help ease them into the power a brand new credit card can yield while teaching them to use it responsibly.
Additionally, older children and teenagers can also learn a lot about charitable contributions. It can become more than simply a financial decision to a child and segue into social responsibility. Help your child select some worthy charities he or she is interested in donating to and decide which ones are the most worthy of his or her hard-earned pennies.
The decision to give your child an allowance or not is a personal one. It can be a very good way of helping teach kids the value of a hard-earned dollar and teach them about responsible spending. As parents, many of us don’t always think about teaching our kids about money. The sooner we start teaching them the value of a dollar, though, the more likely they are to be fiscally responsible adults. What kinds of things do you do to teach your kids about money? We would love to hear your ideas in the comments below.