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Teaching kids to handle money is never easy in this consumerist culture where media and peer pressure dictate what they should wear, where they should eat, or which smartphone they should use. This culture can drive anyone towards irresponsible money decisions and other financial problems later on.
To keep our children from being drawn into the culture of consumerism, we can start by teaching them how to handle their school allowance properly. How?
Model a lifestyle of stewardship. At home, we tell our kids that everything needed to produce money – time, skill, work, products, clients, technology, knowledge, and physical energy – are provided by God (Deut. 8:1). Therefore, we should seek to honor Him when we receive money, give money, and spend money.
Our children also need to see that we can go through life with happiness and dignity even if we can’t buy everything we want. When shopping, for example, we can show them that we only spend within our means, and don’t indulge in excessive buying or impulse spending.
Our children should also see that we are not wasteful. When dining in restaurants or fast food chains, I’m always disturbed when people leave sheer amounts of food on their table as waste, when they can ask the waiter to put their leftovers in a clean box or plastic and bring it home or give it to someone hungry on the street. Wasting food even at home is not a good way to teach children how to manage resources well.
In your own context, come up with practical ways to teach the right way of handling material resources. Just remember: the best way to train your children to manage their allowance well is through your example.
Involve them in managing the family expenses. Older kids and teens will benefit a lot from this practice because at their age, they should see how money is earned, how much the family lifestyle costs monthly, and what adjustments are needed when unnecessary expenses are made.
Showing them how we earn money tells them that their weekly allowance is a product of hard work; that we don’t pluck money from trees or pick them from the ground.
Involve your older children in determining their budget for the week or month, including their allowance. This would give them a bigger picture of how their individual expenses affect the family; and when they manage their allowance properly, they help reduce the family’s total consumption. A friend told me he tried this strategy, and his eldest child told him she would save part of her allowance to help pay the bills. It was music to his ears and a good start in their aim to teach their children financial stewardship.
Find ways for them to develop the habit of saving. Now, these methods should be appropriate to our child’s age. At home, for example, we have an 18-year old student in college and a three-year old who is homeschooled. Obviously, we can’t use the same methods, so we had to unleash our creative juices to help them learn the value of saving.
Here’s some strategies we’ve used for our teenager:
- Set clear goals for saving money. We always give extra money over and above the budgeted allowance for our teenager. But to discourage unnecessary spending, we tell her that whatever she can save from that extra money will be her budget for personal purchases during our year-end family outing. It is enough to motivate her to save more and spend less.
- Open a savings account. Older kids and teenagers are thrilled when they get their first ever savings account with passbook. In our case, we let our teenager take charge of depositing her savings in her bank. Just a word of caution: Don’t open a savings account with ATM card. It won’t aid your goal to teach stewardship.
Teaching our toddler is quite simpler. We created coin banks out of recyclable materials (e.g. empty plastic containers) and wrapped it with sticker paper featuring her favorite cartoon character. This excites her to drop her 5 and 10-peso coins. Each time it gets full, we count it and bring it to the bank to drop in her kiddie account.
If you want to be more sophisticated, open a mutual fund account for your child. Most mutual funds companies today require a minimum of Php5,000 for initial purchase of shares and minimum of Php1,000 for all subsequent purchases of shares. Once your kid’s savings reach Php1,000 or more, use it to purchase new shares. In the long-term, the value of their shares can increase because of interest.
There are many ways to teach our children how to manage their school allowance properly. The practices I mentioned above are based on our family context, so feel free to find methods that fit your family circumstances.
As we model a lifestyle of stewardship, involve them in managing family expenses, and teach them how to save money, we hope and pray that they would be thoughtful and wise in the way they handle their weekly allowance.
Dennis A. Dawal is a Registered Financial Planner. He is a speaker, lecturer, and writer on personal finance and retirement planning.