Everybody wants to set their children on a path to success. The issue there comes when kids start to act like… well, kids. Money lessons are no exception to this rule. Children aren’t born with a sense of money’s value, and often spend as quickly as they get it. So, this begs the question: How do I make my kids better savers? There are many strategies that aim to answer this question, so here are some ways to teach your kids to save.
The “Budget” Allowance
This tactic involves giving your child a significantly larger allowance that you normally would. Instead of $20-30 a month for your young child (starting at around 7-8), try more like $80-100. Don’t scroll down just yet– you aren’t just handing your kid more money. With this extra financial blessing, they get more responsibility. Things like toiletries (soap, toothpaste, deodorant) and school supplies must be picked out and bought by the child. You need to set the firm boundary that they can’t just forego these things to save extra fun-money, but they can be flexible with how they buy them. As long as they cover their bases, they can reach for generic grocery-store toothpaste, or buy bars of soap in bulk in order to save their money for more interesting things. this teaches your child how to prioritize and shop smart. It also teaches them, in a safe and controlled manner, what you have to deal with when budgeting as an adult. This one definitely works better when kids are older, and the dollar values rise with age.
The “Commission” Allowance
This allowance system is more about instilling the value of labor in your child. Like with most standard allowances, all the money is “extra” and the child doesn’t have to cover their own necessities with it. Instead of a fixed amount each month, everyday household chores and responsibilities have a price attached to them. Do the harder jobs, get paid a little more. The more work you do, the more extra money you make. You can get creative if you have more kids and it is harder to spread the workload, like making going grocery shopping with mom or dad part of the paid work. This instills the idea that a strong work ethic pays off, while also motivating kids to help around the home. Some argue that it takes away from the intrinsic value of chores, and doesn’t show the child that chores should be done whether money is involved or not. This is a reasonable argument, but with solid parental communication, it can be done with great success.
Each parent has their own priorities, and this will affect which of these strategies you’d like to employ. Some even go with a mix of the two, and that is perfectly fine as well. As long as you have a solid rationale to the way you go about this, and open communication, your kids will be better off for it. Whichever path you take, your child will definitely have a better idea about how to deal with money by the time they are an adult. After all, what more could a parent ask for?