11 ways allowance helps your kid understand money
There’s little argument at this point that handling money as a child will prepare you for handling money as a young adult and eventually, as an adult. Great. But what exactly (as in literally) do the benefits of giving allowance look like? Why is it such a valuable commitment?
Well, imagine for a moment, that you have been giving your children money each week from the time they were four years old and each week they were encouraged to make decisions about the money. Imagine if you handed over the gift buying power, the junk food buying power, the cheap “crap” purchasing power, and so forth.
Imagine if you allowed your child to experience the frustration when she didn’t have enough money to go out with friends, buy the perfect jeans or pay for her car payments. If you can imagine these lessons during childhood, you can imagine her respect for money heading into the real world.
The Benefits of Giving Allowance (Why it’s worth the inconvenience of getting cash and handing it out!)
- Kids, at an early age learn the true value of money. As in, what can I buy for one dollar? $100?
- They discover what money can and can not do (happiness is not in the box you waited all month to buy, only to forget about a week later).
- They learn the “real” way how hard it is to save money and how easy it is to spend money.
- Kids develop a keen ability to assess what purchases are really important to them and which they can do without. (They’ll eventually say things like, NO. NOT WORTH IT… and walk away).
- Kids discover things about themselves Am I a saver? Am I a spender? When will that benefit me? When will it not?
- Kids who buy their own things, DO NOT expect the adults around them to buy them stuff. In fact, they stop asking.
- Kids learn to negotiate, barter and work together. (i.e. If one kid only has 15 bucks and his brother pitches in five, you bet they come up with creative reimbursement plans!).
- Kids who carry their cash grow independent. There is no need to ask mom or wonder what she’ll say or how to sweet talk her (note: no fits because the answer is yes if the child has money). The child simply walks over, and decides if he wants to purchase or not.
- Kids who make mistakes with their money have learned the good old-fashioned hard way money has value, it can go away and with time, you can earn it back– financial resiliency is valuable.
- Kids who spend enough time practicing also have time to understand and make a judgement that sometimes, it’s ok to say– it’s only money- and there are things more important than a wad full of ones.
- And finally, as a result of their experience with money, kids develop a strong work ethic and an appreciation for everything you provide.
Also, it’s Good to Note
Kids learn to keep their money safe, lend it to those they trust and how to make interest in inventive ways. (As in, hey, I’ll buy you a donut if you pay me back – plus extra).