Earning allowance can feel pretty good, especially when you've worked hard for it. But often, allowance is the first introduction to having money of our own. We can see caregivers, siblings, friends, and others use cards, cash, or write checks for their own purchases, but when we spend or save our own money it inevitably changes our perspective. So, what should we make sure kids learn about money before receiving their first dollar?
How many chores need to be done to afford the purchase? This could be a certain number of days worked around the house, yard work for a neighbor, or even agreed-upon academic performance at school. By understanding how long it takes to earn money back, kids can start to see how much work goes into making a purchase.
Saving some of their earnings is also important. They may want something right away but by learning to save earlier, they can learn that more expensive wants or needs are feasible if they're willing to wait and work towards them. Allowance is a great opportunity for kids not only understand the value of money but also how to manage it responsibly! When kids see that they can earn more money by doing chores around the house, they'll be more likely to want to put some of their earnings into savings.
Just like adults, kids need to learn how to budget their money. Allowance can help with this by teaching kids that they can't always buy everything they want. They need to prioritize and figure out what's most important to them. Kids should understand that money doesn't grow on trees. It's important for them to know where money comes from and how hard people have to work in order to earn it.
Allowance can be a great opportunity for kids to learn about money, but only if they're taught how to use it responsibly. By having conversations and practicing healthy spending, saving, and earning, allowance can be just the first step in a healthy financial future.
What other tips would you add for kids earning allowance?