Teach Kids to Be Financially Savvy With an Allowance

Allowance used to be a right of passage. Kids looked forward to being handed a few dollars for taking out the trash or scrubbing down the bathroom floors. Parents would use chores as a way to teach kids responsibility and hopefully instill a sense of pride in their work. The allowance part came as a way to entice kids to do some more intensive chores and as a way for kids to be rewarded for completing things that were above and beyond their traditional daily activities.

There’s a lot of pushback when it comes to giving allowance. Why would parents pay their kids to do things (chores) that are natural parts of life? One could argue that chores are a responsibility of the home, so paying out a monetary value for completion might devalue the daily responsibility and need for chores. Also, wouldn’t it be a way of teaching them, early on, that the things they get paid for tend to be things they hate? So, they’ll grow up to choose jobs they hate simply because it pays them money. Some parents even say that money isn’t a motivator (it’s not, for some kids). For others, it’s the biggest motivation.

Sure, not all parents think kids should get an allowance, but many do. If an allowance is something your family has chosen to get behind, consider the reasons behind that choice and how it can benefit kids in the long run. Understanding why the allowance reward is being offered not only helps equip parents with the tools to move kids to action, but it also provides an opportunity to go beyond the payout.

Chores and Tasks Help Kids Understand That Money Doesn’t Just Appear

Linking the completion of a chore to a monetary value helps kids learn that money doesn’t just appear. Each time a child wants a new toy, or someone wants the coolest new pair of jeans, it’s important for them to know that the money being spent on it has to come from somewhere. Parents work hard for their money and work hard to be able to provide for kids, but sometimes they can feel like a printing facility.

Younger kids may not understand the concept of work so giving them something to tie money to helps them start to understand that mom and dad are also working hard to be able to have that money. That it takes time, skill, and a bit of dedication to acquire that money – not just a simple request. Assigning chores in ChoreMonster is the equivalent of work for younger ages.

This same idea cannot be as easily applied to teenagers, though. They already understand the value of work and how money is earned outside of the home. If allowance for teenagers is still something that parents are in agreement over, move beyond simple chores. Consider things like consistent good grades or making the honor roll, mowing the lawn or mulching (since they could actually earn money by offering these services to friends and neighbors).

Allowance Is Just One Way to Begin Raising Financially Responsible Adults

Many parents have the goal of equipping their kids with the skills and confidence they’ll need to take on the rest of the world – without them. The purpose of raising a financially responsible adult is one that requires kids to understand the value of money, how to manage it properly, how to save, invest, spend, and budget. Having money of their own helps lead kids to financial success, or at least financial savvy.

For teenagers, an allowance is what helps them be able to afford the things they want and to do the things they want to do. If they don’t have the money, they don’t get to do it. It teaches them to only spend on the things they want or need, and (sometimes harshly) opens their eyes to the world of being left out when they can’t afford to keep going. Parents can teach them about money early, so they don’t end up in a situation where they’re scrambling or finding themselves buried in debt. Financial instability is only a credit card swipe away, so introducing the concept of available funds through allowance can put kids down the right path.

Parents who choose to give older kids an allowance can also use the opportunity to talk about savings and investments. This is especially helpful as most teens spend nearly half of their weekly incomes. Taking those kids to a bank to sit through the process of opening a custodial account gives insight into the process of keeping money safe, and introduces them to interest rates in savings accounts or certificates of deposits. Some banks offer kids a look into their own accounts and allow them to move money almost as easily as parents move it back and forth between their own accounts.

Start the Conversation Around Finances Early and Help Kids Set Goals For Their Money

Omitting the conversation around money entirely can affect kids’ attitudes towards finances for the worse. Parents who are on board with allowance can start as early as preschool. Remembering to keep everything age appropriate will ensure kids are picking up the skills needed to move on to the next stage of spending habits.

Kids as young as preschool can start with money recognition, picking out pennies from dimes and learning to recognize the numbers on bills. Taking a moment to point out when transactions are happening in stores is another chance for them to see that things are only received when money is exchanged. Parents should plan to carry cash on occasion so those preschoolers can start seeing the coins and bills they’ve been working with. Eventually, they make the connection between completing chores, earning money, and buying items.

Tweens can sit in on the opening of their first custodial account with parents and talk with bankers about goals for their money. They can bring the money they’ve earned from chores or neighborhood jobs and watch the first deposit happen, then learn the steps it takes to take that money out and use it when needed. For tweens, this process can be monumental in their understanding of saving and be the first step at perceived investments.

Teenagers who receive allowance can have teen checking accounts where parents can overlook transactions and advise on how to manage money. Many national bank brands are offering some form of teen account these days. Some parents might want to try prepaid cards, only giving their teenagers a small amount of access to cards, but others might be more comfortable with teen debit cards. Any minor will still need an adult to co-sign, but it will be a teens first time spending like they would as adults. Parents can start talking about the risk of spending beyond their means or even give teens a look into compound interest depending on the account opened.

Whether earning an allowance by completing chores through ChoreMonster, or finishing tasks in Landra, allowance just might be the reward kids need to start learning about money now.

The FamilyTech suite of apps are designed to bring sanity to family and connect parents, kids, and couples in a way like never before. Download Mothershp, ChoreMonster, Landra, or HoneyDo to start seeing a happier family today!

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