THE best time to learn about money is at a young age.
"If you help your kids develop good money habits when they're young," writes author Paul Lermitte, "they will have a better chance of being successful managers of money."
Money makes the world go round but is seen as an adult concern. So all too often we avoid the topic with our children who then become adults with a limited understanding of finances. The challenge is to raise our kids to handle money responsibly.
And the answer is to give them an allowance. In his excellent book, Allowances, Dollars & Sense, Lermitte lays out a plan for teaching kids about money that is understandable and works.
Parents in my audiences often ask whether they should give kids an allowance, how much to give them and whether the money should be tied to chores. These are all good questions and ones addressed in this book and in my presentations.
Kids should be receiving an allowance. They need to learn how to handle money and the way to do it is by experience.
So how much should they receive? Lermitte suggests that one way to determine the amount is to use a formula and give them one dollar per year of age. I suggest that another is to develop a budget.
In our home we sat down and determined what they would use the money for and set the allowance accordingly. So when they got older and wanted a raise, they needed to present the evidence of increased costs.
When they were 14, we added a clothing allowance. Having them responsible for buying their clothes from their own money avoided all kinds of arguments with our teens. And let me tell you, once they were in charge of clothing they loved it when we bought them socks, underwear or pyjamas as gifts! How you determine the amount is up to you.
Lermitte suggests that Sunday evening be allowance time. He points out that if we give it to them Friday evening or Saturday morning they will spend it on the weekend. Giving it to them Sunday means they have to make it last the week if they want to have cash to spend the following weekend.
Many families divide allowances into three sections. Money to save, money to give to charity or church and money to spend.
The money to spend is theirs. If they choose, they can blow it. Let's say that during the week they go out and spend their money on junk food. Saturday they want to go to a movie.
But, the money has all been spent and they won't get another allowance until tomorrow.
A responsible parent will allow them to miss the movie. A loan will not help them learn how to handle money. An occasional loan, as long as it's truly a loan, is fine but if you find yourself constantly doling out money and having to keep track of the money owed, one of two things is happening. Your child needs some help learning how to manage her cash or you need to reconsider the size of her allowance.
And what about chores? Receiving an allowance should be separate from chores. This money is designed to teach them how to handle money, not how to earn it.
Chores are the responsibility of all family members and cash rewards should not be tied to taking out the garbage or setting the table. These are things we all, young and old, need to do as part of living together.
There is an argument that tying money to chores teaches kids about working for a living. Once they are old enough they can get a job and that will start the process of learning about earning a living.
The corollary is that they may decide to ignore all chores because they don't need the money or they have a part-time job that pays better.
If we want our kids to grow up to be capable young adults it's essential that they know how to handle money.
Kathy Lynn is a parenting expert who is a professional speaker and author of Who's In Charge Anyway? and But Nobody Told Me I'd Ever Have to Leave Home. If you want to read more, sign up for her informational newsletter at www.parentingtoday.ca.
