Finance Quick Answers
I started giving my children an allowance but want to make sure they don't waste it. What should I do?
Sit down with your children and help them draw up a spending plan for their allowance. Explain to them what you will pay for (school supplies, clothes, etc.) and what they will need to use their allowance for (video games, going to the movies, etc.) Encourage them to save a certain percentage, such as 10%, of their allowance each time. Try opening a savings account at a local bank. Many banks will open savings accounts with little or no initial investment, and this will give your child the opportunity to understand how an account works. Provide a place for the child to keep the rest of his or her money (a special envelope, box, or a piggy bank).
Helping children learn to live with their spending
decisions is another benefit of them having an
allowance. Children need to learn to think through their
purchasing decisions and then assess whether it was a
good decision or not. Allowances can also provide a
sense of ownership and responsibility.
Most importantly, discuss these issues with your
children. Children will not automatically learn good
saving and spending patterns by simply receiving an
allowance. Have regular meetings with your children to
discuss sound financial behaviors.
For additional information, see
www.wisepockets.com a website developed by the
Entrepreneurship and Economic Education at the
University of Missouri-St. Louis.
Mary Anne B. Pettit, Center for Economic Education, Southern Illinois University-Edwardsville
Last update: Friday, July 25, 2008