A+ Advice for Parents

Sound Advice for Teaching Kids the Value of Money

Q: I want to link our children's allowances to some real skills, such as math, goal-setting and saving, as well as doing household tasks. What is the best way to do this? My children are 8 and 10.

A: A challenging economy means more and more parents are handing out savings lessons along with the weekly allowances. Gail Karlitz, author of "Growing Money: A Complete Investing Guide for Kids" (Price Stern Sloan, 2010), offers this good advice.

When you give an allowance, says Karlitz, "you're saying to your child, 'You're old enough to learn the value of money and its role in our lives.' The amount depends on what it is expected to be used for. Many people give a dollar each week per year of age."

Karlitz, who leads a popular workshop for parents titled "The Biggest Job ... Character-Based Parenting," doesn't believe in using allowances to pay kids for household chores. She wants kids to develop a sense of responsibility to the household, to feel that all family members should contribute "because we live here. We respect and take care of our clothes, toys, surroundings -- and benefit from a nice, smoothly running household."

She suggests starting by explaining the concepts of "needs" (food, clothes, housing and so on), "wants" (treats, entertainment, things we like but don't have to have), "goals" (things we must save for, such as a new TV), and "giving to others" (church collections, birthday presents or charity).

Give each child a notebook with a section for each category. "Ask them to label the pages in each section, list what they will include in that category, and indicate how much of their allowance will go to it. Explain that Mom and Dad will take care of all the family 'needs' while they are young," Karlitz coaches. "Discuss and decide what is appropriate for their lists. Will they donate a percentage to a charity? If a toy gun or a midriff-baring blouse is not an acceptable goal, let them know rather than face the 'but it's my money' challenge in the store!"

As children receive allowances and cash gifts, they enter the amount going into each category and keep a running total. "The page for 'goals' might show how much more they need to reach the goal," she advises. "They should also enter the amount they take from any category. The entry gives kids a chance to see how the money is adding up. Use a clear plastic envelope, box or jar for each category for each child, so they can see that actual money."

Set reachable savings goals for kids. "If it's too much a stretch," Karlitz says, "consider paying the balance of the cost of an item after the child reaches a targeted savings level."

Karlitz suggests teaching kids to research prices and sources of their goal items. Who has the best price? Is there a difference among brands? "These are great discussions that help young people become savvy savers and careful consumers!" she says.

(Do you have a question about your child's education? Email it to Leanna@aplusadvice.com. Leanna Landsmann is an education writer who began her career as a classroom teacher. She has served on education commissions, visited classrooms in 49 states to observe best practices, and founded Principal for a Day in New York City.)

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