NDSU Extension Service - Ramsey County


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Children and Money

Children and Money

Where do your children get their money? Most children obtain money from allowances, hand-outs, cash gifts and/or earnings.  An allowance gives youngsters a chance to manage money and practice living within a regular income as if they had a job.  A child can learn more about how to manage money from a regular allowance than from unpredictable handouts, even when these handouts amount to more money. Giving children money whenever they need it or ask for it, instead of on a regular schedule, makes it hard for them to plan ahead.

How large or small an allowance should your child receive?  A good way to begin determining that amount is to keep a record of how much money you give your child in a typical week and what it covers – school supplies and lunches, movies, ball games, concerts, magazines, video games, sports equipment, minor clothing items, grooming aids or cosmetics, snacks and so on.

Some guidelines for an allowance –

-          Beginning with the first allowance and continuing as long as the child receives one:

-          Be consistent. Set a day to give the allowance as well as the amount. Remind the child of the savings plan and separate out that amount immediately.

-          Put it in a safe place or take to the bank/ credit union.

-          Don’t use the allowance as a lever to discipline. Withholding or reducing a child’s allowance for bad behavior and increasing it for good behavior defeats the purpose of an allowance, which is to teach the basics of money handling.

-          An allowance is money children can spend however they wish as long as their purchases don’t pose a hazard, are age appropriate, and fit family values. Children need practice making their own decisions – and they also need fun and “goodies” of their own choosing!

-           Don’t come to the rescue. If children are ever going to learn how to manage money, they must face the consequences of their own spending mistakes. Even though it may be difficult to watch, try not bail them out if they have overspent.

For an allowance to work, parents and children must know what expenses it is supposed to cover. You may want to make a list of these expenses. Talk about how to handle overspending and other problems that may arise. Some parents think of an allowance as a “wage” for the chores that children do around the house or yard. But if children think they must be paid for every bit of work they do, they don’t learn much about the responsibility of being a family member. By giving them regular chores to do without payment, you teach them to accept their responsibilities and give them the good feeling of being a productive part of the family.

As children get older, they may want to look for work outside the home. Before children accept a job, be sure they understand the responsibility it carries. Be sure they have enough time for fun, sleep, study, school activities and family responsibilities.

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