I clearly remember the day that my financial education began.
It was 1956, and I was nine years old.
In our family of 5 kids, Dad doled out our allowances before church every Sunday. We each received a penny per year of age, so at that time, my allowance was 9 cents, and one penny went into the Sunday School offering plate.
But on that memorable day, Dad announced that he had increased my allowance to 40 cents a week.
I could hardly breathe. The news was so unexpected.
Then, Dad explained that I now my responsibilities would now increase along with my cash flow. He and Mom would buy my start-up school supplies as usual.
But after that, Dad explained, I would have to buy my paper, pencils and other school supplies throughout the school year.
I would also need to save –
to buy birthday and Christmas presents for the rest of the family or come up with the cash to get the new bike I wanted.
It made me feel suddenly grown up, in charge, loaded with money and responsibility.
But then of course, new problems also suddenly demanded solutions:
Which store sold paper cheaper? (I learned to scout for bargains, to do comparison shopping, to check the Sunday newspaper for local ads.)
And…what should I say to the freeloaders at school who asked to borrow my paper but never paid me back? Or asked to borrow pencils but never returned them?
Now that I had to take those losses myself, I learned the whys of ethics.
My parents showed me how to use my allowance to develop a plan for spending and saving, but as I grew older my wants (and even some of my needs) grew greater than my parents’ ability to increase my allowance.
So, I developed a babysitting clientele and used the money I earned to buy fashionable clothes, go to camp, and so on. I learned to sew and make crafts to stretch my gift money and increase my wardrobe for less money.
When a child’s income depends on what adults can be convinced to provide, the child tends to learn how to manage people instead of learning how to manage money.
On the other hand, a regular allowance can be a parent’s best tool for preparing children to manage large sums of money on their own one day.
The Consumer Credit Counseling Service at the El Paso YWCA gives these suggestions for teaching money management through a regular allowance:
Wait until your child is ready.
Kids under 8 or 9 may not have the patience to save money or the emotional readiness to make the decisions required for a simple saving and spending plan.
Figure out basic expenses.
Help your children keep track of the money they spend for two or three weeks and use that information to estimate how much they need.
Begin with a simple plan.
An envelope system often works well at first. Show children how to divide their allowance up into envelopes labeled for different purposes—savings, contributions for church or synagogue, lunch money, ongoing school supplies, fun money, etc. The younger the child, the fewer the responsibilities (and envelopes).
Decide together on a safe place to keep the envelopes and explain how important it is to take money from them only when needed.
Children need a regular amount paid on the same day each week—or each month for older children—to learn how to plan. Learning to manage irregular amounts at irregular times is too complicated for children.
So, if the family income is irregular (and believe me, I’ve been there), when money comes in, parents need to set aside the total amount of allowance their child will need for the next several weeks to give it later on schedule.
Make adjustments as necessary.
When children ask for an increase in allowance, they should be able to make an account of how they spend their money now – but not to the penny. It’s reasonable for about 10 percent to be unaccounted for. After kids make an accounting, they can figure out with their parents whether the increase they want is for needs or wants. Then, make the decision based on need and family income.
Re-evaluate regularly as your child’s expenses and ability to handle responsibility increase.
Parents may increase a teenager’s allowance, for example, to include a clothing budget. Their teen is then responsible for buying their clothes and must make decisions about, for example, saving money ahead of winter to buy a winter coat and boots.
Responsible money management is a necessary survival skill. No child should leave home without it.
© Becky Cerling Powers 1995 updated 2024
Reprint with attribution only: www.beckypowers.com
For more parenting insights from Becky Cerling Powers see her book Sticky Fingers, Sticky Minds: quick reads for helping kids thrive in the Bookstore
I don’t remember how old our daughter Jessica was, or what she did to make me think she needed correction. She was probably about six. All I remember is how shocked I was when my attempt to give a simple, logical consequence produced a shrieking melodrama.
Jessica’s allowance was twenty-five cents a week (back in about 1980), so I thought a reasonable penalty for misbehavior was a three-cent fine. It wouldn’t bankrupt her – just make her think twice next time, right?
Wrong. Wrong. Wrong.
When I told my little daughter she had to give me three of her pennies, she reacted like I’d told her I was going to chop off three of her fingers.
She wailed, she sobbed, she set the house vibrating with her grief.
It was genuine distress, too. She was not manipulating me —although I was afraid that if I handled the situation wrong, she’d learn to put on a show like this again next time when she wanted her way.
I also realized I’d misjudged Jessica’s maturity. She was bright. She could count money and she could make change. But, she was not cognitively ready to reason or emotionally ready to understand the meaning and value of 3 pennies. My consequence was not age-appropriate.
So I told her we could make some change. If she gave me a nickel, I’d give her two cents.
Her tears subsided, I gave her one coin, she got two coins back, and I postponed using fines for discipline until she was 9 or 10.
So, are you teaching your kids how to manage money?
Teaching children money management is an important part of good parenting, and it can start as early as preschool. But to successfully teach good financial habits, we need to understand what to teach and when. Here are a few suggestions from Consumer Credit Counseling Service at the El Paso YWCA for tailoring your teaching to children’s levels of emotional readiness and ability to reason:
Preschoolers are concrete thinkers.
They have trouble grasping abstract ideas like money, space and time. Since a nickel is bigger in size than a dime, preschoolers think it’s worth more. They need a simple experience buying items at the store. So, let them hand the money for purchases to the store clerk.
First and second-graders have trouble making choices and are still unrealistic about what money can buy.
It’s hard for them to understand that today's decisions bring consequences tomorrow.
So, give them a small amount to spend. Show them items they can buy with that amount. This helps train them to limit spending to a budgeted amount. Above all, don’t reward begging by giving in to it.
Third and fourth-graders benefit from receiving an allowance.
Doing simple price comparison problems with a pocket calculator is helpful for them, and so are parents’ explanations about the why of some of their family shopping choices.
Children this age also can begin running errands, first with an older brother or sister and then by themselves. They can take money in a change purse, and then buy one or two grocery items and bring back the change. These activities are an important step toward being able to shop independently in a few years.
Preteens usually like to shop and are ready to buy some of their own clothes.
Since preteens can handle greater responsibility, they can start earning money by doing odd jobs at home and elsewhere—which is fortunate because their activities with friends, hobbies, and school activities cost more. They can learn simple budgeting, saving, and even simple investing.
Teens feel a lot of social pressure to keep up with the crowd
They want to dress like their friends, do what their friends do, and have whatever “everybody else” has. They want to be independent and make their own decisions, but their financial dependence gets in their way.
Responsible independence is the goal. Teens can work on that with their parents. If they show responsibility for handling their allowance, increasing the amount to include a clothing budget is helpful. Teens are more likely to be reasonable about money issues if they have developed experience handling money responsibly since they were small, and if they understand the relationship between their spending and the family’s income.
Teaching kids wise money management is an essential goal of good parenting.
When kids learn to budget, save, and even invest before they leave home, it can prevent a world of trouble for them later in life in many areas, not just their finances.
My next blog will explore best practices for using a teen allowance to help teenagers become financially independent.
Reprint with attribution only: https://beckypowers.com/
For more parenting insights from Becky Cerling Powers see her blog at www.beckypowers.com and her parenting book Sticky Fingers, Sticky Minds: quick reads for helping kids thrive in the Bookstore
It’s Countdown to Christmas time. School break will be here, kids will be hyper and excited – with too much time on their hands – and adults are feeling stressed out because they feel like they don’t have enough time to do all the things they want to get done before the big day.
So how do you avoid getting knocked off balance?
Well, now’s the time to give your expectations a hard-nosed reality check.
Take a few quiet minutes (after the kids’ bedtime or before their waking up time) to think carefully about what you are expecting to happen and what you are committing yourself to accomplish these last few days.
Is it realistic?
Children need more adult attention and companionship the last week before Christmas.
That is reality.
Kids don’t handle marathon shopping expeditions well at all.
Eating lots of sugary food makes kids hyperactive.
Getting exposed to lots of advertising makes children dissatisfied and discontented
(That is what advertising is designed to do – make you dissatisfied, make you want more).
The lack of a regular healthy routine of chores, mealtimes, rest times, and bedtimes makes it hard for kids to settle down. Or to feel secure. This is especially true during times of high stress.
Keeping all this in mind, here is the Bottom-Line Reality:
Your world won’t fall apart if you lower your expectations a little and don’t get everything done that you planned to do this year for Christmas.
You and your family will survive the holidays (and life!) better if you accept imperfection.
First, you need to Keep Up – not with everything. Just with the basics.
It’s true that you usually have to put housework on hold while you get ready for the holidays. But it just doesn’t work to let everything go completely while you focus all your attention on kids and holiday preparations.
It’s amazing how soon a family can become paralyzed by a mountain of messiness when they ignore day-to-day chores.
So you just have to learn to recognize your minimum daily requirements for keeping control of clutter and undoneness.
Organization expert Bonnie McCullough recommends that you keep up with laundry and dirty dishes, and decide what to feed the family for dinner by 10 o’clock each day (by 10 a.m. if you are at home during the day, by 10 p.m. the night before if you will be gone).
Then prevent clutter from spreading by spending a focused five minutes picking up daily in each room of the house (10 minutes in the kitchen).
Third, arrange now – before school lets out – to trade kids with a friend.
Set up an agreement to babysit a friend’s kids in exchange for having them babysit yours. Then set aside all your adult-only holiday preparations for a full or half day to focus attention on your friend’s kids and your own.
Include your kids in your holiday preparations.
Every year as your kids get older, they will be able to participate in more and different ways. So be on the lookout for things they can do to help and enrich the celebration through their suggestions, abilities, special talents and developing interests.
Kids can arrange the figures in a Christmas creche and help decorate the tree. Assign one child to display each day’s delivery of Christmas cards on a door, wall, or banister. Show kids how to make snowflakes, paper chains, or different kinds of garlands for the Christmas tree, hallway, doorway or stairway.
(Suggestions for garlands: string white styrofoam packing squiggles or colored marshmallows on yarn, or string alternating pieces of popcorn with raw cranberries.)
If you don’t want the children’s decorations in your living spaces, let them decorate their own bedrooms.
Put up a paper tree on a wall or door and let them make their own ornaments after they have festooned the room with paper chains and garlands.
Set out art supplies for kids to make tree ornaments (if your kids are little, you’ll need to make the ornaments with them):
Using cookie cutters, trace holiday shapes on cardboard, thin foam sheets, or felt. Decorate with glitter, foil, or scraps of lace and other trim from your sewing box. Use ornament hooks to hang sour gumdrop type fruit candies or white-chocolate-covered pretzels.
Make ornaments from cornstarch clay with this recipe: Combine 2 cups baking soda, 1 cup cornstarch, and 1 ¼ cups cold water in a saucepan. Stir until smooth. Then bring to a boil and simmer one minute, stirring until the clay is as thick as mashed potatoes.
Pour onto a tray and cover with a damp cloth until the clay is cool enough to knead it lightly, and mold it into shapes or roll it out on waxed paper and cut it with cookie cutters. Dry and paint.
Look online to find ideas for simple gifts you know your kids can make at their age and level of development with materials you have on hand.
Give kids supplies to make gift wrap, gift tags, and table decorations
Let them use crayons, magic markers, or printing techniques to decorate personalized gift wrap paper, and make gift tags by tracing around cookie cutters on old Christmas cards or heavyweight colored paper.
To decorate the Christmas table, kids can make placemats, place cards, and centerpieces. A walk outside to find pinecones and evergreen cuttings may be just what kids need to burn off energy before devising a creative centerpiece.
Let kids help with holiday greetings
Children enjoy sealing envelopes, sticking on stamps, and making one-of-kind holiday greeting cards using a variety of drawing, printing, and other art techniques.
Some children might enjoy addressing cards (I used to assign that job to my children as a penmanship exercise when we were home schooling.)
Share the holiday tastes of helping to make your Christmas treats
Most kids love helping make cookies, candies, fruitcakes, and other traditional holiday sweets. Let them crack nuts, measure ingredients, decorate cookies, etc.
When the treats are all baked, and all the batter spoons licked clean, kids also enjoy wrapping and delivering food gifts to friends and relatives.
School age kids can devise holiday entertainment
Budding actresses and actors enjoy dramatizing the Christmas story or figuring out original holiday skits. Even shy children who don’t care to perform for an audience may lose their bashfulness if they can hide behind a puppet screen to put on a puppet show.
The last day or two before Christmas, when the suspense is becoming unbearable, is a good time for children to use their excess energy practicing skits and songs for entertaining guests.
© Becky Cerling Powers 1995 updated 2023
Use with attribution only [email protected]
For more insights from Becky Cerling Powers see her book Sticky Fingers, Sticky Minds: quick reads for helping kids thrive in the Bookstore
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