Money talks, right? Maybe it’s not as chatty as a tween girl, especially my daughters, but it’s a very powerful and valuable tool. These are really important concepts to teach your kids early on. One of the best ways to do so is by coming up with an earned allowance for your kids. Giving them an allowance isn’t nearly as valuable of a lesson as making them earn it, and teaching them how to use their earnings.
A friend of mine, Luke Ford owner of My Computer Works, shared his experience with his children and their allowances. He spoke about it being one of the best things he could have done for them. Below are some of the ways that he handled their allowance and taught them some valuable lessons about money.
Want vs. Need
Parents today tend to want to take care of their kids and end up just buying “stuff” for them to fulfill this want. However, that leads to kids having a lot of things they do not need but just want instead.
Luke made sure to describe the difference between wanting something and needing something. If there are things that children need (clothes, shoes, etc.), it can be something that parents buy for them. If it is something they just want (toys, games, etc.), that is something the child has to pay for with money he or she has earned.
“Price is Right” Learning Experience
To ensure my children understood the value of money, I showed them posters of bikes vs. car, fast food vs. fine dining, and so on to compare their different prices. I turned this into a game to show the value of money and what it can really buy and it was very interesting to see how my daughters set prices on various items.
Starting the Allowance
The first Sunday, they received money to put in their “fun box” so they can buy one thing. I took my daughters to the bank to open up checkbooks, statements and explained how they should reconcile their account. My daughters, with my help, came up with a “plan” to save the money in the fun box first. At the end of the month, they could buy their one thing (with approval) that they pay for from their fun box. Any leftover money can be deposited in the bank or kept in their wallet for the next month. You could enhance this by creating a charity box for donations, and match your children’s funds.
Outcome of These Lessons
Through all of this, my children have learned a lot about money and its importance. My girls now understand the difference between the things that they want to buy and the things that they need to buy. Along with that, they understand the consequences of overspending on wants vs. needs.
These valuable lessons are something that will carry over into adulthood and maybe one day their own company. I’d love to hear from you and what you do to teach your kids the value of money!
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