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There’s no shortage of conflicting advice when teaching your children about money. The best way to teach children about money is by giving them an allowance. Weekly allowances teach children how to save, spend, and invest money. It also helps children how to take responsibility for their possessions.
Giving children an allowance could teach them financial literacy skills that will help them throughout their lives and in their careers. Giving
Experts recommend weekly allowances for children so that they can get used to handling money responsibly at an early age.
Here’s how to help children gain financial literacy by giving them allowances!
1. Start early
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Introducing money lesson using real-life scenarios help your children gain financial literacy earlier than you think. Studies show that when children start to understand the concept of money at a young age, their money habits are set earlier on in their lives.
Pay attention to when they start asking questions about money and match the lessons with their age and maturity level.
The idea behind an allowance is that it teaches them responsibility and helps them learn how to manage their own finances. You can start by giving them small amounts of cash that they have to budget for things like lunch at school.
2. Teach Them to Budget
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An allowance is an excellent step in teaching children how to manage money wisely. You might find it helpful to give your children money in intervals, either after every week or every month.
Gradually spreading out the timing will aid your children to understand the need to manage their spending. Make sure they know how much money they have in their account each week or month.
Encourage your child to save any extra change they might receive from gifts or chores around the house.
Budgeting ensures they have something extra when they need it later down the road—like when buying books at school. Make sure they understand what things cost before making purchases.
3. Help Them Set Goals
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Setting attainable goals helps your child learn how to make smart choices with their money. consider asking your child how they plan to use the allowance you give them. When you give your child an allowance, you can help them set goals for the money they earn.
For example, if your child wants to save up for a new toy, you can help them decide how much of their allowance should go toward that goal.
You could also encourage them to hold onto some of their money in case they need it later on!
4. Show Them the Importance of Saving
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Giving money to younger children is always a gamble because they might use it to buy unnecessary things. Nevertheless, it’s essential for them to learn the benefits of delayed gratification.
If there are games or toys that have piqued their interest, suggest they forgo spending their allowance on immediate pleasure and instead save for a few more weeks to get the purchase they want.
5. Create Learning Opportunities
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If your children spend all their allowance immediately, resist pleas for more money before their next allowance is due.
These consequences impact powerful lessons. A talk with your kids about how to spend their next allowance will prompt them to be careful on how to spend the money the next time they get their allowance.
6. Communicate to Them the Value of Money
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Giving your child an allowance consistently is a great app to instill the value of money and promote a sense of responsibility. Allowances can be structured in different ways. Taking on more chores to earn more allowances, teaches your children the value of money.
Asking your children to pitch in on household expenses, or promising to add onto their allowances, has a powerful impact on how your children understand the value of money.
7. Teach them How to Negotiate a Raise
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If your child takes to the idea of an allowance, they may question if there’s any way to increase their allowance.
Sit down with them and discuss their goals and if they are in a position to earn more than they are. This might require an adjustment on the parents’ side to the contract earlier made, so you have in writing what’s expected of them.
As they age, change the allowance accordingly.
When your children are younger, keep the amount small and begin to set expectations such as whether they need to earn their allowance or what expenses they are expected to pay.
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Giving children an allowance could teach them financial literacy, but it’s important to set the right expectations!
Make sure you don’t overspend on their allowance, and remember that your role as a parent is to help them learn how to spend money wisely, not just to let them have it and not think about it.
With the right approach and expectations, giving your child an allowance can be a great way for them to get a head start on understanding how money works.