The subject of giving children an allowance is a sensitive one with most parents—everyone has an opinion either about how much or on what basis to give it. Or to even give an allowance at all.
Roopa Mutti, financial advisor at the Fleetwood branch of Envision Financial, a division of First West Credit Union offers these tips to help you effectively use allowance to teach your children lessons in money management:
Don’t pay too much
Make the amount reasonable to help teach your child the value of money. If you compensate too much for too little you may not be teaching the lesson that earning money takes effort and time.
Don’t pay in advance
By advancing an allowance, you reinforce the cycle of debt that currently plagues many Canadians. Instead, help your children set savings goals, which provides you with the opportunity to discuss their wants and needs and how much time will be required to attain them.
Do think big
A fundamental concept of sound financial management at any age is saving up for a long-term goal. Often with kids we focus our lessons on small discretionary spending like saving for toys or treats. Instead, using bigger ticket goals teaches them something more significant; how much savings can add up over time and knowing what you are saving for makes it easier to save.
Regardless of where you are in the child-rearing process, it’s never too early or too late to sit down with a financial expert to discuss your family’s financial plan and how you can set yourself up to meet your long term savings goals—together.