Both my husband and I discuss finances together and some of the best ways to teach our kids about money. Since they are only 3, we realize that it is never too early to start learning those priceless spending tricks and tips everyone should know. Having friends with other children, I asked one day to give me the best reasons they had for allowing their children to have allowances. The responses were awesome and it really made me think of all the benefits giving your child an allowance offers.
1. Teaches the concept of budgeting
An allowance is one of the best tools we have for teaching our kids the concept of budgeting. Allowance works nicely to teach this because it consistently reinforces the idea that they have a budget, and they need to find a way to fit their monthly purchases into that budget, and if they spend it all on the first day they can they would need to wait an entire month until they have money again.
2. Helps avoid unnecessary purchases
When you a a parent provide the necessities that a child will need and advise them to purchase their “extras”, you begin to teach a real lesson between the needs and wants in life. The beauty of the allowance system is, that when it comes out of their own pockets, the children are much more selective about their purchases. When it’s our money, they want to buy everything in sight, but when it comes out of their own allowance, they think twice before buying an item.
3. Teaches them to save toward a bigger goal
Getting a small amount monthly is great but reminding children that they can save that smaller amount monthly, weekly or daily and pool the total amount to buy a really nice item that might cost more. Allowance enables kids to see very clearly that if they delay gratification for a while they can reap an excellent reward.
4. Teaches responsibility
One parent told me a story that her child kept breaking toys and art supplies that the parents were purchasing for her. They realized that she wasn’t connecting the idea that items had to be worked for and their hard work was being ruined by her breaking the toys. When they made her start purchasing her own toys, she realized the bigger deal at hand and hadn’t broken a toy or art supply again.
5. Allowance allows independence
An allowance is a wonderful way to give them complete control over something and enable them to make their own decisions. I do think that this allows for children to make good choices and will lead them on the right direction for future financial responsibility and decision making.
