Helping Kids Learn Money Management || Part II

BLG SZ - Helping Kids Learn Money Management (Part 2) - AK - HSLDA Blog

To see Part I of this article, go here.

For families, especially large families with lots of kids to think about giving allowance to, it can seem impractical to implement a weekly allowance. I understand that. But here are two things to consider: 

1) Managing money is part of your child’s education and it’s easier to part with the money if you think of it as a schooling expense. 

2) Studies have shown—according to what I read in Raising Money Smart Kids—that kids end up having access to the same amount of cash, whether they get an allowance or not. Kids who get an allowance have to save up for things and properly allocate money, or learn to go without. Kids who don’t get an allowance need last-minute money from mom or dad, on the way out the door. Both have access to cash but only one of them is learning to self-regulate. 

I think the allowance system is great for getting kids to learn to save, give, and manage their spending habits. But aside from learning money management, the best thing about allowance is teaching kids principles of restitution. 

Helping Kids Learn Money Management (Part 2) - AK - HSLDA BlogThere have been many times when one of our children has destroyed a sibling’s property or used up a portion of it, without asking permission. In those instances, the child is required to not only say sorry, but to pay restitution. If a child does not have their own money, how can they learn restitution?  

Recently, my five-year-old (whose allowance is $1.25 per week) destroyed a library book on purpose, because she was mad at her sister. She was required to take her wallet to our local library and tell the librarian she was sorry and that she would pay for it. It was a costly lesson for her—it took half her savings to pay for the book, plus the $10 processing fee—but, hopefully it’s a lesson that will stick with her for a long time. 

In Part I of this series, I mentioned that our kids have certain spending responsibilities. We have kept their spending responsibilities pretty basic so far. They need to cover their fun-food/toy expenses for most outings.

A month ago, when the kids had an opportunity to go on an outing with friends and purchase a sandwich for $3 or a sandwich/cookie combo for $5, we told them we would pay for the sandwich but if they wanted the cookie they had to pay the extra. One kid decided to pay and another one didn’t. The kid who paid later told me it “wasn’t worth the money.”  

Incidentally, the kids no longer ask me to buy stuff for them when we are shopping because my reply is always, “Did you bring your own money?” 

Recently we decided that our oldest daughter is ready to start managing money to buy her own clothing. We calculated what we would normally spend on her fall/winter clothing and decided to take that amount and divide it by how many weeks are left until she will need the clothing. She will now get that amount extra in her weekly allowance. She will need to be careful to set that extra allowance money aside in a special envelope or else there won’t be enough come fall. She also has specific instructions to buy certain required items (a coat, boots, etc.). To help her know how to get a good deal, her dad took her on a price-comparison shopping trip to several different stores.

Someday soon we will add more spending responsibilities and give her another allowance raise. It won’t cost us extra money. It will just be a matter of letting her take more responsibility over her expenses. 

I hope all of our children will make great strides in learning to manage money while we are still around to help guide their decision making and maybe even provide a safety net if/when they utterly fail.

Most of the year, the kids are fairly good about saving their money. But then we get to basketball season where much of their weekly allowance, and often some savings, is spent on concessions. I look at the neon-colored Laffy Taffy that they purchased for $2 and think that’s a total waste of money. I would never spend my money on that. But that’s for them to figure out. Someday, when they really want something big, they will realize that they bought way too much Laffy Taffy and they will need to learn to live without and spend smarter next time. 

In the meantime, for the sake of both their pocket books and their dental hygiene, it’s a good thing that basketball season doesn’t last all year.

-Amy

Photo Credit: First photo taken by Full Coverage Insurance, graphic design by Charity Klicka; second photo courtesy of Amy Koons.

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