Teaching your kids to budget their allowance is not always an easy thing. Kids are naturally going to want to buy things when they get a bit of money and you have to be careful how you approach the subject. If you are careful to start early, you can teach them the proper principles of money management at a young age. Here are some tips to help your kids budget their allowance properly and grow up a good financial base:
Start with a favorite piggy bank
Getting your child a piggy bank that they can cherish is a big deal if you make it one. Make getting a piggy bank a huge production when they “reach a certain age” and start getting their own money. This means getting a piggy bank they truly will love. Perhaps they have a favorite character?
Here is an awesome one you can get on Amazon that is red hot! Frozen is about as popular as it gets if you have a young lady in the house.
Give them incentive to save
Think about it. In our broader society, we are given incentives all the time to save money. Why not do that on a kid sized level? When you give them their allowance, come up with an incentive plan for them to save. Make it reasonable, because giving them ridiculous incentives will only make them feel entitled down the line. Offer them a bit of interest or perhaps a free ice cream. Small things can make a big difference.
Let them see the reasons for saving
Allow them to begin to “purchase” their own things that are important to them. For example, allow your six year old to “buy” his or own action figures. Explain that he can have the small Batman figure now or the big Batman figure if he waits and saves his money for a week. They will eventually realize that saving is the way to go.
Go ahead and teach them the emergency plan
No, they will not understand why a portion of their allowance has to go back for emergencies. They don’t have to like it but you still need to create the habit early. Talk to them about it and explain that it is “what big kids do” and that they need to learn early because they are special.
When they make poor decisions, don’t save them
As kids. we expect our parents to save us. It is their jobs. With money, that is a very poor lesson. If your child goes out and spends all their allowance and savings on a toy, we need to let them feel the repercussions of that. Perhaps when they have no money or that trip to the bouncy house, they will think twice about spending all their savings. Let them learn no matter how painful it might be.
Allowance is simply a way for the kids to learn the harsh lessons of economics. The more realistic you can make that, the better prepared they will be financially when the time comes to grow up.
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