If you understand the concept that money doesn’t grow on trees, it’s probably because you had to earn the money that you have.
No one simply gave you money just because you asked for it, no doubt. If this is the case, then why do we continue to give money to our children who have done nothing to earn it?
There are arguments on both sides of the spectrum on whether a child should be paid for doing chores or not. Some say that children should be paid for chores because it teaches them responsibility while others argue that they shouldn’t be paid for doing something that they are supposed to do anyway.
Either way, giving children allowance just isn’t enough to teach them the value of financial management or the importance of earning the money that they receive. Let’s take a moment to really analyze the prospect of providing money to your child without teaching them how to either manage it or earn it, shall we?
The Unconditional Allowance
According to Money Crashers, the unconditional allowance involves giving your child a regular amount of money without requiring them to earn the money by doing chores.
On one hand, this is good because providing a weekly or monthly allowance can assist in teaching your child how to manage their money. If they know that the money is coming, and how much, then they can begin the process of spending a percentage of their money while saving the rest.
They may also open a bank account and watch their money grow, or even invest their money, under the unconditional allowance process. This is a wonderful process, if it works without a hitch. Unfortunately, there’s always a hitch!
The downside to providing your child with money when they fail to earn it through chores, or some other means teaches your child a false sense of security revolving money matters and shows them that all they must do to get money is ask someone for it.
This viewpoint was produced by a 2000 JumpStart Coalition survey entitled “Improving Financial Literacy—What Schools and Parents Can and Cannot Do,” and revealed that kids who received an unconditional allowance without earning the money somehow had the lowest rates of financial literacy and were more likely to have a poorer work ethic.
The unconditional allowance also includes giving your child money “as needed” when they want a specific item. This can be a problem as well, according to Money Cashers. “Payments as needed given to kids who haven’t done anything to earn the money does not provide consistent money to the child that will help the importance of saving,” according to the find.
Can you give money to your kids and teach money management simultaneously?
It is indeed possible to teach your kids the value of a dollar while giving them an allowance, even if the money given is “as needed” and not earned through chores. The process for teaching money values and management to your children begins with you, according to the 2000 JumpStart Coalition survey. “Continual discussions with your children about money, alongside supporting their attempts to save money, will assist in teaching your child how to manage money,” the survey revealed.
Whether you give your child money or make them earn it, one thing is clear: teaching them how to manage the money they receive is key. Help your child to understand the power in ‘money growth’ by creating a chart that they can use each time they receive money. The chart can have a section dedicated to the money received, money used, and money goals. Working with your child while creating the chart will also help them to understand why each section is important. You may also teach your child the value of a dollar by discussing with them how they might earn the money that they need.
For example, if they want a bike and they only have half of the money saved, then help them to discover ways to earn the rest of the money themselves. This will teach them to appreciate the bike because they helped to purchase it, teach them the power of saving for something they want, and teach them pride in earning the money that they receive.
Helping your child to understand the value of a dollar is crucial. You don’t want your child to grow up and become dependents on either you or someone else to give them money that they could simply have earned on their own. Withholding your desire to give your child money without teaching them money management will ultimately teach your child how to become more innovative in discovering new ways to earn money, such as entrepreneurial ventures.
The sky is the limit to what your child will learn once they understand that they have the power to earn money, save money, and then decide how it will be used. But remember…it all begins with you.