COMMENTARY | Like most parents, I gave my children an allowance when they were young. When my son tried to buy ice cream from the ice-cream truck with his "play money," I knew I'd have to start giving him real money.
But more importantly, I'd have to teach them about budgeting and money management so they could be financially independent one day. The most important thing I wanted them to learn was how to save for the future.
According to an article by CNNMoney, a recent survey showed most children receive an average of $15 a week in allowance.
Unfortunately, most kids spend their money as quickly as they get it. I wonder whether they would spend it as quickly if they earned it.
Giving them a simple budget
Instead of giving my children a weekly allowance to spend on whatever they wished, I encouraged them to participate in the family's saving and spending plans. I let my sons manage a small portion of our budget. My sons had to divide their money into various "envelopes." They had to save 10 percent for long-term financial goals. They had to give 10 percent away to a charity of their choice or as holiday and birthday gifts. They had to save an additional 20 percent for short-term goals such as new bicycles. The remaining 60 percent they could help me spend at the grocery store or mall.
Earning their keep
When my sons were old enough to work, I encouraged them to earn money. My older son started his own lawn-mowing business. He kept track of his customers, his expenses and his profits. My younger son earned money by washing the car and taking odd jobs such as helping people move furniture and boxes and dog walking. My sons continued to save 30 percent of the money they earned for long-term and short-term goals.
Getting a kid to save
According to the survey, 61 percent of parents pay an allowance. More than half started the parental payouts when their child was 8 years old. What shocked me was the fact that only 1 percent of parents said their kid saves money.
I firmly believe a child is more likely to save money he or she has earned. I think it's good for parents to come up with excuses to pay their children so money gets tied to work. I never paid my sons for good grades because it's a given that a person should strive to do their best. I don't believe in grades either for that matter.
As college students who will soon be financially independent, my sons are learning that a pizza tastes better when you pay for it with your own money. As a parent, I am hoping they will continue to save and invest so they can eventually support their own families.
Besides teaching them personal finance basics, I try to be a good example by staying out of debt and being financially responsible. Perhaps that's a better gift than any other parental payout.
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More from this contributor:
- Personal Budgeting
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