1 - Spending and saving.
2 - These jobs are a normal part of family life.
3 - Open a savings account at a bank.
Many children first learn the value of money by receiving
an allowance. The purpose is to let children learn from experience at an
age when financial mistakes are not very costly.
The amount of money that parents give to their children to spend as they
wish differs from family to family. Timing is another consideration.
Some children get a weekly allowance. Others get a monthly allowance.
In any case, parents should make clear what, if anything, the child is
expected to pay for with the money.
At first, young children may spend all of their allowance soon after
they receive it. If they do this, they will learn the hard way that
spending must be done within a budget. Parents are usually advised not
to offer more money until the next allowance.
The object is to show young people that a budget demands choices between
spending and saving. Older children may be responsible enough to save
money for larger costs, like clothing or electronics.
Many people who have written on the subject of allowances say it is not
a good idea to pay your child for work around the home. These jobs are a
normal part of family life.
Paying children to do extra work around the house, however, can be
useful. It can even provide an understanding of how a business works.
Allowances give children a chance to experience the three things they
can do with money. They can share it in the form of gifts or giving to a
good cause. They can spend it by buying things they want. Or they can
Saving helps children understand that costly goals require sacrifice:
you have to cut costs and plan for the future.
Requiring children to save part of their allowance can also open the
door to future saving and investing. Many banks offer services to help
children and teenagers learn about personal finance.
A savings account is an excellent way to learn about the power of
Compounding works by paying interest on interest. So, for example, one
dollar invested at two percent interest for two years will earn two
cents in the first year. The second year, the money will earn two
percent of one dollar and two cents, and so on.
That may not seem like a lot. But over time it adds up.
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