It’s gratifying that more of my friends are asking me about starting their kids on an allowance program at the ages of five or six. I think those are great ages to start (even four for younger siblings, as they like to mimic the older ones). More and more of them are getting the message that building good habits early will help them avoid having to break bad habits later.
I thought it prudent to share some of the ideas I’ve been sharing with my friends. Here are five really practical reasons for parents to start teaching kids about money that I’ve learned from personal experience as a parent:
1. A Strong Foundation – Building good habits early (which includes making some minor mistakes along the way) will help you avoid having to break bad habits later (or REALLY big mistakes).
2. Have Mall Fun – A good allowance program will make trips to the store or mall so much easier. When your kids ask you for something, you can tell them to save for it. You might get a few tantrums when you first start doing this, but your kids will get it if you stick to your guns.
3. Goals Are Good – Goal setting is essential to teaching kids about money (That’s how they deal with #2.) and is an incredibly valuable life skill for them to learn. Set goals together. Note to self: Follow your own advice more often on this one.
4. Confident Kids – Money is subject to so many taboos, not the least of which is discussing the stuff within the family. Set an allowance, give them cash to handle and discuss making choices, needs and wants and other essential money concepts. It will help make them more confident consumers when the subject is brought out into the open.
5. Visible Dough – So many of the transactions that kids witness involve invisible money. Make sure there is a physical component (cold, hard cash) to your allowance so that kids can count, transact and get confident with real money. Sure, money is already largely virtual and is only trending more in the total virtual direction, but young kids have tremendous difficulty with abstraction. Handling actual money is essential to early money learning.
I hope these tips help you. Let me know if they do or if you have anything else to add.