Giving your child an allowance isn’t about handing off some money. It must be used to teach them about the benefits of budgeting and saving.
How an allowance helps Children learn about money
Kids learning about money at the ages of 12-13 never forget their first pocket money.
The amount that parents give to their children to spend as they wish differs from family to family. Timing is also another important consideration. Some parents want their kids to start earlier than others. To these parents, kids learning about money is a very important process of understanding how the real world works.
Some kids get their pocket money on a weekly basis, others get it on the 1st day of the month. In any case, parents should make clear what, if anything, the child is expected to pay for with the money. At first, most young kids spend all of their allowance as soon as they receive it.
If they do this, then they will learn the hard way that spending must be done within a budget. Parents are usually advised not give more money to their children until the next allowance is due. The objective is to show young kids that a budget demands choices between spending and saving.
Older children may be responsible enough to save money for larger costs, like clothes, electronic items and vehicles. Many people who have written on the subject of allowances feel that it is not a good idea to pay your child to work around the home. These jobs are a normal part of family life.
Paying children to do extra work around the house can be useful. It can even provide an idea of how a business works. Allowances give children a chance to experience the things they can do with money. They can share it in the form of gifts or giving to a good cause.
They can spend it by buying the things they want or they can save and maybe even invest it. Saving helps children understand that costly goals require sacrifice: you have to cut costs and plan for the future. Requiring children to save part of their allowance can also open the door to future saving and investing. many banks offer service to help children learn about personal finance. A savings account is an excellent way to learn about the power of compound interest. Compounding works by paying interest on interest.
For kids learning about money is essential for survival and will help give them an idea of how to budget and secure their financial future.
1) Use your allowance on items that you need the most. As a kid, never spend wildly.
2) Ask your parents for money for extra jobs you do.
3) Get a savings account when you turn 18. This way you can build your bank balance.