This question was recently asked to the PSP Tweens group:
"What are you doing to help your kids learn the value of money? I’m trying to figure out how to teach my kids that Money doesn’t grow on trees and doesn’t come magically out of the ATM machine every time we need to buy something… Besides opening a bank account and using Allowance Manager (which we just started) https://allowancemanager.com), what have y’all done?
---What do you make them pay for?
---Do you make them save birthday money? Do they have limits on what they can spend their money on?
---Are there any good books about helping your kids learn the value of money?
Thanks in advance."
Here are tips Parents shared:
1. Offer choice and incentive with money allocated for essentials:
One parent writes: "I confess we have not done much. But at 7th and 9th grade we took the plunge and got both boys ATM cards. They can see what they spend and I feel it has been a good lesson. They get a budgeted amount to cover lunch( $5 day only) - if they are organized and pack lunches, they get to spend the money how they please. The reality has been a mix between buying food and bringing food. My older son gets $20 additional to cover any weekend expenses. And my favorite part about it has been that I am not constantly handing out $5 bills and fielding requests for money!"
2. Encourage entrepreneurism:
"I also asked my kids to sell thing, toys, games, etc to cover for other items that they want. My son has done very well with ebay, which allowed him to buy a pair of sneakers he wanted."
3. Create a list with your child to examine priorities over their immediate "needs" and wants to eliminate impulsive purchases:
"Every time my kids want something (new video game, toy etc...). I ask them first if they want to add to their future gifts list. If they want it more immediately then I ask if they are willing to spend their own $ saved from birthday, chores, other gifts. If they say 'no' end of discussion. No reason for me to spend $ they wouldn't. If they say 'yes' and it is more than 10% of their savings, they have to think it over for 24 hours to really make sure that is how they want to spend their $. So working on value and eliminating impulse buys."
4. Be strict - flat out refuse any incidentals that go over the monthly allowance.
"We have (in the past) given our girls a monthly allowance and they have to figure out how to spend it wisely. It includes going to lunch or movies with friends, buying music or DVDs and even buying clothing (beyond the seasonal necessities of winter coats, underwear, socks, etc. which we pay for). If the $ runs out they're SOL. It works really well, and we still do this for our 12 year old, who wants EVERYTHING."
5. Sometimes there is nothing like experience! For older, High School aged children, babysitting and other duties in the neighborhood (like yard work) can be a great way to teach the concept of "hard earned money." For younger kids, consider a joint venture savings project like a trip.
"My youngest just graduated from high school (yesterday!) and she has been getting $25 a week. She also babysits - the allowance is a small amount of what she has to spend. I do pay for most of her expenses still (we had complex negotiations over who paid for what around prom) but she understands that in college I will cover tuition, dorm, fees, meal plan and one trip home each semester, but she needs to earn the rest. She will get enough money through work study, I believe, to be well situated financially. The whole teaching kids about money thing is so difficult, I think, because you can be really methodical about it but the kids' temperament and attitudes aren't necessarily susceptible to your methods. I'm one of six siblings and I think this is an area my parents really excelled at. They helped us understand about money from an early age, encouraged savings in a variety of ways, joint ventured with us on large expenditures that we had to save for (I saved three years of babysitting money to pay for half of a summer in Israel and my parents paid the other half), taught us practical skills (I had a checking account when I was five and balanced my own check book). I've been on my own financially since I was 19 and it's those early lessons I really relied on. Yet, although we all had the same lessons, half of us ended up really good at budgeting and saving and the other half ended up spendthrifts who got into a lot of money trouble as adults."
6. Create a balance. Draw the line on certain types of purchases and savings while also teaching skills for bartering and trading in goods.
"The challenge for us has always been sustaining systems. He (usually) gets a $20 debit card every month. The ones that stick are sell your stuff if you want something we won't pay for, trade in your electronics for other electronics (I love that culture. I'm big barterer) and if you get a big graduation gift from Grandma you must put half of it in the bank. I also heavily discourage or forbid certain ephemeral purchases on mobile phone apps & iTunes purchases."
7. Ask for a written proposal - this forces your child to budget and plan what they need versus want/like.
"When my son entered middle school, he asked for a bigger allowance than the token allowance that he had been receiving. I told him to figure out how much pocket money he needed for each week, and to come back with a written proposal. He figured out how much snack money he needed after school plus a little extra for a movie or other extra expenses. We agreed upon a fair amount, and that was that. He got the whole amount on Monday, and he needed to budget his money to get through the week. The second week, he ran out of money and asked for more. He didn't get any. By the 6th week, he was building a savings. He liked to use his savings to buy pizza or movies for his friends when they didn't have enough money. I reminded him that he could save more money if he brought (free) snacks from home. He agreed, but pointed out that that just wasn't cool."
Some parents also shared Allowance Rates (as of June 2013)
"My kids get $1 per grade through middle school per week - given to them at the start of each month, so they begin to learn how to budget. I.e. my 7th Grader gets $28 per month. My eldest went to public h.s. and I think we gave him $20/week to cover incidentals, and the lunch served in the cafeteria (which I initially pre-paid via some system Laguardia has) was so nasty that he quickly began bringing his own lunches. We've always paid for clothes etc...My middle one is headed to a private High School and in the fall where they provide lunch. I am guessing we'll also give her $20/week to cover incidentals."
"My kids got a big bump in allowance at middle school to cover lunches. In elementary school they ate school lunch (or, if they didn't want to, I made them lunch). In middle school they had an "out to lunch" option. I gave them $15 a week and that was to cover lunch and discretionary spending, with the idea that $10 of it was for lunch. They could bring lunch (which they packed themselves) or buy at school or outside or come home for lunch, because we lived really close."
Read more about Tweens & Allowance HERE
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