It is a great idea to give your children an allowance as soon as you think they are old enough to manage one, either on their own, or under your supervision. You will probably find that you need to give them some tips on how to manage that allowance, which you can do in the following ways:
Lead by example
If you want your children to learn good money management skills, then you need to prove that you can manage money well yourself. Show your children that, as you walk around the supermarket, you are making an effort to look for the cheapest products, or those that provide the most value. Let them know that it just isn’t possible to buy everything you want and that, like them, you have a budget to which you need to stick. Very young children don’t need to know the ins and outs of your financial responsibilities, but you can at least share the fact that money isn’t just for fun.
Discuss what the allowance should cover
It is important to let your child know exactly what you expect them to buy out of their allowance. Initially, it may be nothing more than a few sweets, or low-cost toys, but that may progress as they become more responsible. You may, for example, ask them to cover the price of their school stationery, DVD rentals, toys, games and mobile phone costs. Make it clear that once the money is gone, they will need to have a very good reason before you are willing to give them any more.
Decide when you are going to pay your child their allowance and be consistent, whether it is once a month or once a week. Initially, it is probably best to give them money once a week so that you can keep an eye on how they manage it. Once they have proved themselves trustworthy, paying them less often is a good idea. After all, most adults only received a pay packet once a month, so training your children to manage a whole month’s money will be excellent experience for them to fall back on in the future.
Suggest they save a certain amount
Although it may not be vital for young children to save money, if you can get them into the habit of doing so, it will stand them in good stead for the future. You could, for example, explain that if they want to buy people presents for Christmas, they will need to save up, or they probably won’t have enough money to buy very much. Discuss with them how much they should save from each allowance and where they should put it so they aren’t tempted to spend it on themselves. A separate piggy bank may be in order.
Praise them when they have money left over
It can be hard for young children to save money, so make sure you praise them when they do so, even if it is only a very small amount. Show them how even loose change can build up into a substantial amount of money over time. They may appreciate a digital money box that tells them how much money they are putting in and the total amount they have saved. Give them a goal so that they save a certain amount of money and can then treat themselves they really want at the end.
Get them to work for the money
You might decide to give your child a basic allowance, but then get them to do chores for anything over and above that. Alternatively, you may want them to do a certain number of chores before you even give them their allowance. Decide what you are going to do and be consistent. If they don’t do their chores, they don’t get their money. That way, they will learn from an early age that money doesn’t grow on trees and that they need to earn it. A good work ethic from a young age will stand them in good stead for the future.
Many young adults leave home only to find that they cannot manage their money in the real world. Make sure your children have a head-start by teaching them to manage their money while still young.