Good money management skills are something many adults do not possess. It can take years of trial and effort in order to learn the best money management processes. This comes after several occasions of failure. Think of how much better you would be with money management if someone had taken the time to teach you the proper money management skills as a child. Perhaps you could be rich by this time if you had known as a child all the things that you know now. While it might not be possible to go back and have someone teach you as a child what you know now, you can teach your child good money management habits so he or she will be in a better financial situation than you by the time he or she is your age.
Giving your child an allowance is a great way to teach money management skills and habits. You can start to give you child and allowance to teach money management skills as soon as the both of you are ready. Many parents start to teach their child when he or she begins kindergarten. There are parents that start to teach money management earlier or later depending on the child’s readiness.
Decide how much money you would like to give your child for an allowance. You might consider giving a dollar for every year to teach money management. Or, to teach your child budgeting as a part of money management, ask him or her how much they think they will spend during a week. If they do not know this, you can have the child write down everything they would like to purchase. Of course, your financial standing will have an effect on how much your child received for an allowance.
Choose a period that you would like to give your child the allowance. The ideal period is somewhere to for allowance to teach money management is between one week and one month. The pay period for the child can be the same as your own pay period. Some parents choose to give their child a monthly allowance to teach them the value of budgeting as a part of money management.
One thing that you might want to stay away from as you teach your child money management is the idea of giving an allowance based on the chores that they do. This is because chores are typically done as a family contribution not something that is simply done to teach money management. In addition, the child might opt to not do their chores and simply not receive an allowance. This is not the kind of habit that you want to teach.
Teach your child to save as a part of their money management. You do not have to force money management habits by making the child save the money that they receive. You can simply teach good money management by reminding them that they will not receive another allowance for a certain period of time and that if they spend all their money at one time they will not have anything left. As you teach your child money management a large part of it will be trial and error. The child will have to learn as they go along. You might consider giving the child a few extra dollars specifically to teach them the value of saving. Giving an incentive like matching every dollar that they save will help you teach them to save.
It is very likely, as you work to teach them proper money management, that the child will make money mistakes. Don’t chastise or punish them for these mistakes as they are simply learning experiences. It is much better for the child to make money management mistakes early in life rather than later on when it can become much more costly for them.