Two Ways to Teach Your Children About Money

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Two Ways to Teach Your Children About Money

Teaching your children about money can be a tricky proposition. On one hand, you want to give them “experiential” lessons — ones that involve action, rather than just words. On the other hand, you don’t want to stress them out too much, nor do you want them to associate helping around the house with a paid activity, rather than a family responsibility. What can you do?

Here are two popular ideas. Feel free to choose either strategy, or mix-and-match components of these ideas together, in the way that will fit your family best.

#1: Baseline Chores Required, Bonus Chores for Cash

Many parents face the following problem: They want to teach their children that helping out around the house (such as carrying their dishes to the sink, making their bed, or carrying out the trash) is a required part of being a member of the family household. It’s not work-for-hire; it’s just part of being a family member.

At the same time, they want their children to have an “allowance,” so that their kids can learn how to budget and spend their own money, rather than relying on their parents to make all the spending decisions. But they don’t want to just hand their child an allowance for simply existing — “money for nothing.”

How can they balance the two desires?

One possible method is to establish certain chores as a baseline requirement. These aren’t chores that the children do for money; they’re chores that the children to in order to contribute to the overall household. Then, they establish a “second tier” of chores that fall above-and-beyond the basic requirements. If the children perform any of these chores, they’ll get paid. The parents pre-establish a “pay chart” that shows how much money the children can earn by completing each specific task.

If the kids want to save up for a toy, game or music, they can tackle this “extra work” for the sake of earning additional income. If they don’t want to save for new toys, they don’t need to take on additional work. Either way, the child learns both self-reliance and teamwork. The child discovers how to earn the money to buy his or her own toys — while still contributing to the overall household team.

#2: Weekly or Monthly Salary

Here’s a second model: The parent pays each child a “salary,” which the child receives either weekly, biweekly or monthly. The child is then tasked with the responsibility of budgeting that salary throughout the month. If they spend all of their money before the next pay period, too bad — they’ll have to miss out on that ice cream, pizza, toy or game.

This has become a popular model because it mirrors the same situation that adults face: Most grown-ups get paid weekly, biweekly or monthly, and then need to budget their money throughout the span of time until their next payment arrives. In other words, it realistically prepares the child for the budgeting situation they’ll be presented with as an adult.

One critical component of establishing this type of model is to carefully establish what expenses the child must cover, and what expenses the parents will cover. For example: You might decide that if the entire family goes to the zoo, the parents will cover the bill. But if the child wants to go to the zoo with his friends, he must cover the bill himself. Make sure that your child is clear about what he’ll be expected to pay for, since this piece of information is crucial to the child’s ability to plan. Write these guidelines down, and hang it somewhere visible, so there’s no confusion.

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