Raising kids can be hard, and many parents find that raising them to be smart consumers is even more difficult! Every parent wants their little one to grow up to be smart with their money, but not many know how to effectively communicate the importance of money managing, especially to impulsive younger children. Freedom Debt Relief has found that one of the most effective ways to teach children about money is to allow them to earn an allowance by helping out at home, bringing home good grades, or behaving for smaller kids, and asking them to ration and manage their money on a week-to-week basis. Here are our expert’s tips for how to help your kids divide their allowance to help them learn how to be smarter consumers later in life.
Spending. This should be the smallest section of your child’s weekly allowance. The spending section is their “free play” money that they can do with whatever they please. Freedom Debt Relief has found that the lesson most kids can learn from this section of their allowance is that money is a limited resource. If they choose to spend this whole segment on the first day, don’t let them come running to the bank of mom and dad for more!
Saving. The saving section is for children to choose a larger purchase that they would like to purchase (like a new bicycle or gaming system) that will take time to build up to. Freedom Debt Relief has found that you can help encourage your young one to save more by offering to match whatever amount of money they choose to put towards their larger purchase.
Charity. The charity portion of your young one’s allowance is useful for teaching them that helping other is the best way to spend our money, and instills the value of gratitude. Together with your child, Freedom Debt Relief researching a charity that is near and dear to your child’s heart (such as one that helps abused animals find homes or helps to cover the medical expenses of children with cancer) and donating a small portion of their weekly or monthly allowance to a worthy cause.
Investing. This category is useful for teaching school-aged children about the power of interest. For children who are old enough to understand, Freedom Debt Relief recommends asking the child to invest a small percentage of their money into a bank-controlled savings account. Each month, you can sit down with your child’s statement, and review how much interest they have earned, just by allowing the bank to hang onto their money! This is an excellent strategy to help children learn about the power and rewards associated with saving, and can also help them build towards a larger college fund.
Freedom Debt Relief has found that the best way to help children grow up to be smart consumers is to instill the values of smart saving and spending early in life. By taking the time to help your little one understand that money is a finite resource, you’ll be setting him or her up to make better money management decisions for the rest of their life!