May 17, 2021 | Kids Club. Share this article:
Summer is around the corner, and with it comes endless opportunities for the kids to ask for money. Whether it’s snacks at the pool, treats at the grocery store, or souvenirs on vacation, the increased together time on summer break can really wear on your resolve to say no to extras and stay on budget. So how can you end the constant begging and keep your sanity this summer? While it seems counterintuitive, raising your kids’ allowance can actually save you money, while also teaching them critical financial concepts that will last a lifetime.
The Case for More Money
The problem with giving kids smaller amounts of money more frequently is that it comes too often. If your child blows all their money right away, they know they don’t have to wait long to get more. Giving larger sums of money less frequently can teach kids how to plan and save for future expenses so they can make their cash last until their next ‘payday.’
Lump sums can help kids develop and strengthen skills in the areas of self-restraint, anticipating medium- and long-term necessities, learning the difference between wants and needs, and in setting goals and priorities—all crucial habits they’ll need to get ahead financially in the future.
How much should you give?
For younger kids, start by giving them a lump sum per event; say $5.00 a day at the pool or $25 a day at the amusement park or county fair. As kids get older, increase the sum and the time between pay periods. For pre-teens, this might mean giving them their allowance monthly, and for older teens every three months, six months, or even a year. The sum should be big enough to give them some wiggle room to make choices, but not so much that they won’t have to make hard decisions.
Set Ground Rules
When setting the amount and timeframe of paydays, it’s important to sit down with your child to determine what expenses they’ll be expected to cover. Pre-teens might be expected to cover their entertainment expenses, while older teens might be expected to pay for wants and needs, such as back-to-school supplies, clothes, school lunches, and sports fees.
The beauty of this system is that when money comes out of their own pockets, children are much more likely to be selective about their purchases. Having a lump sum reinforces the idea that they have a budget, and they must find a way to fit their wants and needs into that budget.
What if your child goes out and blows all their money in the first week, or runs out of money to pay for sports fees or a prom dress? The key to making this system work, and the hardest part for parents, is not bailing them out when they run out of money. Instead, let them figure out real-world solutions, such as taking babysitting jobs, mowing lawns in the neighborhood, or doing extra chores to earn money.
This is difficult, but it’s critical to stick to your guns. If mom and dad always run to the rescue, kids will learn that they don’t have to make hard choices—which can lead to bad habits like reliance on credit cards, payday loans, and requests for bailouts even when they’re adults.
Your child will make bad money choices often, and you should cheer when they do—internally, at least. Most people aren’t born with an innate sense of how to manage money; it’s a skill that’s learned over many years. Providing your child with real-life experiences in budgeting, making choices, and anticipating short- and long-term needs while they’re young and the consequences are relatively minor is an invaluable part of preparing them to make sound financial decisions and secure their economic future as adults.
View all Latest News and Information.