Unison Parenting Blog: Money Management for Kids

How do you start teaching kids about money? Basically, allow them to have some money and let them make mistakes.

From my last post, remember the purpose for separating chores from allowances (with one exception below). Chores are about living in a household together and being responsible to those you live with. A child should not get paid every time they do a chore; this is an unrealistic expectation about life. Establish a consequence for not doing chores.

On the other hand, allowances reduce kids asking you for money and put the responsibility into children’s hands for learning purposes.

An example of learning: One of our children wanted to spend money on a toy at a dollar store. I warned the child that even though the cost was cheap, so was the quality, and the toy would easily break. There was no better education than when the toy didn’t even make it home before it fell apart. The child was crushed but started saving money to acquire better toys.

I recommend an age-appropriate allowance that doesn’t cover all of their spending needs. These needs are generally outside of the range of food, clothes, school supplies, birthday presents for others – those stalwarts that parents provide. Allowances are typically directed to toys, gaming, collector cards, hobbies, their own treats, and other amusement.

How much should you pay? It’s up to you. Penfed Credit Union recommends weekly rates of $1-5 for ages 4-6, $5-10 for ages 7-10, $10-15 for ages 10-15, and $15-20+ for ages 15-18.

If the child wants to accelerate saving for a special purchase, then optional, paid chores are the way to go. Primary chores keep the household humming on a regular basis and should not be tied to allowances. Secondary chores are infrequent, such as cleaning the garage or washing the car. The lesson is doing extra work earns you extra cash, a great life lesson for kids.

In my next installment, I’ll talk about how to teach older kids to save their money and prioritize their spending.