April is Financial Literacy Month and it’s a great time to develop a plan to teach your kids about money. One very popular way is to give them an allowance.
Before you decide to do that, a local wealth adviser says there are things you will want to consider.
“What are we trying to do with the allowance… we’re trying to get them to understand that in life we earn money,” said Jim DeGaetano of Diamond Wealth.
To do that, DeGaetano says to simply talk about it when your kids see you spend. If you’re shelling out cash for pizza, explain that. Are you writing a check for the mortgage? Tell them about it.
“Especially when they’re young, you don’t have to get too complicated,” he said. “You just bring it up in everyday life.”
DeGaetano recommends starting an actual allowance around age 10 if you think your child is mature enough to understand it, and above all, earn it.
“You can have a chore chart, checklist items, you can use points, Monday thru Friday certain chores that they do,” he said “But you have to stick to it. If you don’t stick to it, your kids are going to know they’re going to get points and just earn money for nothing and that actually has the opposite effect of what we’re trying to do in raising our kids.”
DeGaetano wrote a book aimed at teaching kids about money, called Larry the Bunny Saves His Money. And he wrote a poem for parents to remember when it comes to allowances.
“An allowance should be earned, not a gift. Working hard is learned, or it won’t exist. A big question I hear about incentives is for what and when. Additional chores and exemplary behavior pay could begin as early as 10. Remember why it’s in place, so the goal is not misplaced. Our kids need to learn how to earn money and plan to save it. Implementing an allowance will help them display it.”
If you’d like some free resources to help spark conversations with your children, click here.