Saving and Spending for Kids : insights from the Parent Powerline

Saving and Spending for Kids : insights from the Parent Powerline
Sunday, February 18, 2024 by Becky Cerling Powers

Categories: Parent Powerline

Saving and Spending

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.

Be consistent.

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.

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

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