I have an ongoing debate with my husband about how we give
money to our children. We have two sons, ages 12 and 16, and a daughter, 14. My
husband feels they should simply get whatever money is needed, as it is needed,
for them to live their lives. I feel we should set an amount per week (and not
too high!) that they will then have to learn to budget themselves, and not give
more than that. If there is something important they want to do or buy, they
will need to plan for it. Which is the better approach? I applaud your concern about the
lack of a game plan for your family finances. We have an epidemic in our country
afflicting our children: financial illiteracy with chronic affluenza. Because
money basics are often not taught at school, the prescription for the cure is
for both parents to become financial role models.
I endorse giving regular allowances divided 10/20/70: savings,
short-term and now. Allowances can be a powerful tool for teaching kids how to
handle money. Decide as a family what each child’s allowance will cover: the
cell phone, entertainment, one tank of gas, charity. The first 10 percent comes
off the top for saving; the second 20 percent is put aside for needs during the
next few months; the 70 percent is left for the agreed-upon expenses and fun.
Stick to it and watch them develop a level of financial independence before
heading off to college.
Hollis Page Harman, wealth advisor, Capital Intelligence
Associates, Los Angeles, and author of Money
Sense for Kids!
Allowances are about learning.
Children need to practice using, saving, budgeting and giving away money. They
need the freedom to make mistakes, and they need clear expectations. The amount
of money you give as an allowance should be proportional to the amount of time
you are going to devote to talking about money and its purpose.
Think of this as leadership development. Successful leaders
learn 70 to 80 percent of lessons essential to their success from taking on
responsibility.
You may decide that allowances are not the proper venue for
such learning, but congratulations on having discussions about money and
children with your husband. You might invite the children into the discussion.
It is perfectly OK for children to see that adults don’t always agree on
everything, and it is hardly news.
Caring adults can help children think about the question: What
is money for? Discussing the allowance is a terrific opportunity, and that
discussion might ultimately be the most important part.
Bob Kenny, executive director, More Than Money Institute,
Concord, Mass.
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