What Kids Buy—With Allowance, You Can Teach Positive Saving and Spending Habits
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It’s an all too common scenario:
Child says, “I want that.” Mom replies, “I don’t’ have any money.” Child, trying
to be helpful, quickly replies, “That’s OK, just use your card.”
Unfortunately, the child in this story usually equates swiping the
plastic—whether a credit card or ATM card—with “free money.” Without realizing
it, many moms are teaching their children to become future “spendaholics.” How?
By overusing the credit card—and by acting like their children’s personal ATM
machine.
What kids buy with their allowance teaches them good, solid financial principles
that will stick with them the rest of their lives. However, what kids buy with
your money (or with your credit card, as the case may be) does little to develop
their understanding of sound spending and saving habits.
What Kids Buy with Allowance—And Why Parents Give Allowance in the First
Place
What is an allowance for, anyways? An allowance should be given to promote
healthy money management. It should not be given as compensation for chores.
Chores are an everyday part of being a member of the family. The praise and
thanks for completing chores is remuneration enough.
Some parents might ask, “Why give kids money for free?” Good question! But the
fact of the matter is, you already do give them money for free by doling out
cash for treats, clothes, games, toys, books…you get the picture. Even without
an allowance, you’re still giving your kids “money for free.”
And this is why an allowance is so great: it allows you to keep the spending on
your children in check (actually saving you money!) while teaching them valuable
life skills at the same time. Allowance shifts a lot of the spending decisions
to your children—and what kids buy with their allowance teaches them practical
financial lessons that last.
This doesn’t mean taking a 100% “hands-off” approach to your child’s spending
habits. Instead, it calls you to help teach them the basics of finances so they
can go on to manage money on their own. It requires you to set up guidelines for
how much money they can save and how much money they can spend. Then, after the
financial foundation is laid, what kids buy with allowance is up to them.
Can You Control What Kids Buy with Allowance?
On page 178 of my book When You’re About To Go Off the Deep End, Don’t Take
Your Kids With You, I discuss a money management plan that both kids and
parents can appreciate and enjoy. I call it “piggy banking with a twist,” and
here’s how it works.
In order to start receiving an allowance, your child simply has to agree to use
the “piggy banking with a twist” system. Instead of having one piggy
bank, you want them to have four!
The four piggy banks and their purposes are:
1. Super Savings Pig – This is your child’s long-term savings. As money
accumulates over time in this bank, your child will learn the benefits of
delayed gratification.
2. Play Dough Pig – This is your child’s fun money. It is to be spent on
a weekly basis for immediate gratification stuff like candy, small trinkets, or
whatever they want!
3. Grand Goal Pig – This pig helps your child save toward a specific
goal, usually a special toy they really want. Many moms report that their kids
take far better care of the toys they have bought with their own money than the
ones they’ve been given. What kids buy with allowance gives them a sense of
pride, accomplishment and ownership.
4. Kind Charity Pig – This account helps instill the value of giving to
others. Get your children involved by discussing and visiting various charities
and letting them decide where their donations go. And when your children are
ready to make their donations, ensure they are the ones who mail or
hand-deliver them—not you.
How much should go toward each pig? Most kids find it easiest to put 25% in each
account. Older children can flex these guidelines a bit, but a good rule of
thumb is to put at least 10% toward charity and another 10% toward savings.
You Bought What?!
What kids buy with allowance will often seem like plain ole’ junk to you.
Sometimes your children will want a cheap toy that you know will break shortly
after they purchase it. Or maybe they want candy that you would rather they
didn’t have.
The best thing to do in these situations is to allow your children the
experience without any interference from you. The natural consequence of having
the toy break is a wonderful learning opportunity. When it comes to candy,
whatever junk food is not allowed at all is what they will want even more. So
allow your children to spend their “play dough” money as they wish. This is a
form of respect and can teach your children how to spend wisely.
In the end, what kids buy with allowance is more than material goods. As you
implement an allowance system and stick to it, you will be teaching your
children valuable lessons—lessons about how to spend, how to save, and how to do
both wisely.
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Kelly Nault, MA author of When You’re About To Go Off The Deep End,
Don’t Take Your Kids With You inspires moms to put themselves first—for the
sake of their children. She shares time-tested tools that motivate children to
want to be well behaved, responsible and happy! Sign up for her
free online parenting course here.
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