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172601136-FOne of the hardest parts of being a parent is finding the right balance between letting them make their own decisions and telling them what to do.  I for one am fond of being in control!

When it comes to money and how they spend their allowance, finding this balance can be even harder because we don’t want them to waste money.

The first thing you need to remember when it comes to kids and their allowance is that the purpose of an allowance is for them to learn how to manage money.

Kids are not born with the knowledge of how to manage money; we must teach them how it works and the best way to do this is through their allowance.

Since our role as parents is to teach them about money, we need to set up some guidelines to ensure they are learning the right money management skills through their allowance.

Guideline #1: Sharing Expenses

Determine what you will buy and what they will buy.  While you might want to buy them everything they want, it is not practical and it does not teach them anything about managing money or the value of money.

You will have to determine what expenses you want them to cover but some ideas might be:

  • You will not buy toys except for holidays and birthday’s.  This way they have to save money for all wants outside of gift giving times. (This is great rule for the younger kids).
  • You set a dollar amount that you will spend on them for clothing, and if they want more they have to buy it.  For example, if you are doing back to school shopping and set a budget of two hundred dollars, and they want to spend $250, they must come up with the difference.  (This is great for budgeting,comparison shopping and more!  Good for tween and teens.)

You will also want to set buying rules.  For example if they are not allowed to buy video games rated ‘M’, they need to know that ahead of time.

Guideline #2: Learn to Allocate Money

You need to set requirements for how they allocate the money when they receive it.  This is where you teach them about saving, spending and giving.

Kids don’t always realize that they need to be saving for the future or that being charitable is a great feeling.  We need to instill this knowledge in them.  Now some kids will automatically lean to the saving side and some will lean to the spending side, but they won’t save it if they don’t realize there might be a future need.

Explain to them that when you receive money sometimes you spend some right now, sometimes you save for a big event far off in the future (cars and college) and some of it you give to those less fortunate than us.

How much you require in each category is up to you, but a general allocation could be: Giving 10%, Saving 15% and the rest in spending.

Guideline #3: Let them Decide

Once your rules are set then you should step back and give them free reign over what they want to spend the money on.  This is often the hard part because we might not always agree with what they are buying (as long as it fits your buying rules), or we realize that it is a bad purchase.

This is where they learn those money and life lessons early on, so they don’t make them on bigger purchases when they are adults.  Just remind yourself it can be better to learn with experience than being told by your parents.

You can still help them make decisions and talk through a purchase, but thefinal decision needs to be theirs.

Guideline #4: Do NOT Save Them

This one if for you!  Do not “save” them if they spend all their money and don’t have the money to buy what they really want.  This is when your parenting empathy comes out and you say “I am so sorry you spent all your money and can’t buy that new toy, maybe we can come up with a savings plan for you to save the money”.

While not always easy to watch our kids struggle learning new things, just remind yourself that it is better they learn these skills and lessons while living under your roof.  Give them the right tools and the framework for success and they will excel at managing their money.

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1 Comment

  1. Im Glad na khit pano natuturuan din nmin ng maaus ung anak nmin pag dating sa pera. At the age of 5 ndi sya tulad ng iba na kpag may pera bili dito bili dun or ung tipong ipphwak sa parents ung money then hhanpin kasi pera nya dw un. hahaha. Pag may pera sya ibinibgay nya skin, then aq nmn itinatago q o bnibili nmin ng alm nmin na kailangan nya. like now nag sschool na sya. gusto dw nya ng trolley bag. so sinced may pera nmn sya last dec. un ung plan na bilhn nmin pra nxt schooling di n nmin problemahin pa. 😊

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