Allowance [Dr. Laura Connerly] A research study revealed
that young adults learned about financial management from their parents.
As parents we are our children's most important source of financial information.
If you give your child an allowance, seize the opportunity to teach good financial management
practices.
What it is an allowance?
An allowance is a specific amount of money given at a regular interval.
It's important to be consistent.
An allowance isn't payment for chores, a reward, or a punishment.
If money is used as discipline, a child may get the idea that everyone and everything
has a price tag.
Children should have regular household chores that are done not for allowance but as their
responsibility as part the family's cooperative living situation.
However, it's okay for parents to offer other tasks for which the child can earn money.
And what about paying for grades?
Parents may want to emphasize the value and achievement of education.
Paying for grades can give the impression that money is the only motivation for learning
and success.
Good report cards can be celebrated with special family dinners or outings.
Why should children receive an allowance?
Allowance can be a great teaching tool for your child to learn good money management
skills.
Receiving an allowance provides an opportunity for children to gain experience in money management.
They can make spending decisions and set savings goals.
Parents should provide guidance but also let the child have some freedom to make decisions.
Give enough freedom to allow some mistakes but step in if it looks like the mistake will
be very costly.
Try not to be too critical.
Your child's financial goals may differ from your own.
Praise successful efforts.
At what age should parents start giving an allowance?
Your child is ready for an allowance when she starts to show an interest in money and
seems to understand the basic concept of exchanging money for goods or services - maybe by age
five or sometimes earlier.
Of course, if you have an older child and haven't given an allowance it's not too late
to start.
How much allowance should parents provide?
The amount depends on the parent's income, the child's age, and the expenses the allowance
is intended to cover.
Look at your budget and decide what you can afford.
A very young child may receive several different coins each week, like quarter, nickel, dime,
penny.
This can help them to learn the names and appearance of different coins.
Older children will have more spending opportunities and often want items that come with a more
expensive price tag.
Decide which spending categories the allowance will cover.
Toys or games, charitable donations, and entertainment are a few spending categories to consider.
How can parents teach about money management?
An easy way to teach basic money management concepts is to discuss "Spend, Save, and Share."
A general guideline is to spend no more than 80%, save at least 10%, and share at least
10%.
Younger children can save money in a piggy bank.
Young children may be more comfortable saving most of their money and they usually like
to have it someplace where they can see it or at least hear it rattle in the piggy bank.
Older children can open a bank savings account.
Guide your child in setting goals for spending and saving.
Remember, you are your child's most important teacher when it comes to money.
Make allowance more than a handout.
Train your children to be savvy money managers.
[Narrator] For more ways to help your children develop strong financial skills, visit the
Arkansas Saves website.
www.arfamilies.org/arkansassaves . You can also "Like" the Arkansas Saves facebook page.
www.facebook.com/arkansassaves
Kids and Money Series - Allowance Laura Connerly