Summer often means children have more exposure to television and advertising, more time with siblings and friends and more opportunities to buy things. "Parents often are at their wits’ end," says LSU AgCenter family economics specialist Dr. Jeanette Tucker.
Parents wonder, "Should children be given an allowance?" "Should they have to work for the money they have?" "How can I help my child learn about managing money?"
Tucker says children learn about money from those around them. They watch their parents spend money and learn from them. They watch their siblings and friends, and are influenced by them. They watch television advertising and are encouraged to buy the latest toys and gadgets. Yet, research indicates that parents are generally a child’s greatest financial influence.
Although it takes years for children to develop a sound sense of money and how to use it, summer provides a perfect time for parents to lay a foundation for children to form positive money management skills, according to the family economist.
"Parents can help their children understand and learn money management skills by including them in appropriate discussions about money matters," Tucker says, giving examples of the cost of a summer swim club membership or a new television set. She adds that parents can help their children learn by demonstrating good money management skills themselves, such as wise use of credit and prompt payment of bills.
"Children need to learn how to earn an income and evaluate the way they spend it," Tucker says.
Allowances and earnings can be very effective tools for helping children as they learn to live within their means, Tucker says, adding that one of the best learning opportunities a child can have is to experience not having enough money to buy everything he or she wants.
"This experience allows them to learn the concept of scarcity and how to make spending choices to live with the consequences," she says.
Children often purchase items that parents consider useless, irresponsible or of poor quality. "When that happens, remember, it is important for children to learn from their own mistakes without your criticism," Tucker says, explaining, "Experience, both positive and negative, is a great teacher."
Allowances should begin as soon as children are capable of counting money and understanding the principle of exchanging money to buy things, according to the family economist. Coach your children and give them guidelines as they learn to manage their allowances.
The allowance should be large enough to cover their needs, like school lunches, plus some money for personal use, savings and sharing, such as making charitable contributions. The amount should increase as children grow older and their needs change. To encourage savings, consider matching a child’s savings, like an employer matches a worker’s 401(k) deposits.
Parents face several alternatives if their child runs out of money before the time for the next allowance. One option is to let children learn from past mistakes and do without. Another option is to lend the needed money with an agreement on a repayment schedule, and perhaps, interest.
Older children frequently want to earn their own money. They enjoy the independence of earning rather than asking for money. Employment can help your child develop a responsible and positive attitude toward work and provide an opportunity to understand money in terms of the time, effort and skill required to earn it.
One caution about work, however, is that paid employment should not consume all of your child’s time. Tucker says kids also need time for school activities, studying, sleep, family responsibilities and fun. Research suggests that 15 hours of paid employment per week, or less, is best for most high school students during the school year. Like everyone, children need a reasonable balance in their lives.