How Well Do Your Children Understand Money?

“No, we can’t afford that right now.”

“Money doesn’t grow on trees you know.”

“When I was your age, all I had was a stick and my imagination to play with.”

We have all either said or heard something similar to those statements above. We have all turned down requests from our children for something or another. Sometimes we turn them down just because we don’t want them to have that BB gun that we know they will “shoot their eye out” with. Other times, we just simply don’t want to spoil them. However, in these tough economic times, the reason is that often we can’t afford it.

It is very difficult for children to understand when we say we can’t afford something. Let me call your attention to something that you probably already know but haven’t thought about. Schools teach our children to add, subtract, multiply, and divide. They teach them to identify money and even make change. However, they fail to teach children how hard money is to make and how easy it runs out. Children don’t learn how to make a budget and stick to it in school. Teachers don’t teach them how quickly money can run out. Do you know why teachers neglect to do so? There are two reasons:

1. The government does not make them. The government gives teachers a list of standards that they have cover over the course of a year. Chances are that fiscal responsibility isn’t on that list in your child’s state. If anyone knows a state that does please email me and let me know. I would like to move with my kids to that state.
2. There is a big possibility that your child’s teacher isn’t fiscally responsible. To be fair, teaching isn’t the most lucrative profession in the world. If your child’s teacher is younger, then chances are he/she is still trying to pay off college loans. Your child’s teacher is trying to figure out how to do his/her own budget. How is he/she going to teach your child to do so?

“How can I help my child have a better understanding of money? I can’t afford to pay them an allowance!”

You can give your child an allowance. It doesn’t have to be real money. Sticker charts for younger kids are great. Give them some reward/goal to work for. For example, your child can have extra hour of video game/TV time once they earn twenty stickers. However, you need to broaden this once your child gets older.

Where the usual allowance system fails.

When most parents give their child an allowance they usually give the child money in exchange for chores. Then the child gets to keep all of that money to buy whatever they want once they save this. I wish the government let me do that, but that isn’t how life works is it? Older children need to come to an understanding that not all of the money you earn goes to purchase things that you want. Who wants to pay taxes, rent, utility bills, food etc.? Think about it. Most kids just spend their allowance on luxuries. They have no concept of spending money on necessities.

A better, more accurate allowance system.

First of all raise your child’s allowance a little bit. Remember that an allowance doesn’t have to be paid in real money. However, make your child pay a certain percentage of his/her allowance for things like renting their room and bed, clothes, and meals. Your child will hate this, but it will teach him/her character and an important life lesson.

Take it to the next step.

Every now and then, raise their expenses without raising their allowance. Explain to your child how prices go up on groceries and other needs your family has. If your child wants a raise in allowance right off the bat, say no. Explain to them that your pay doesn’t go up just because the price of gas went up this week. However, if your child asks for a raise several weeks down the road, give it to them. Many people don’t get raises in real life just because they are afraid to ask for them.