Thinking about starting your child on an allowance? There are several simple steps we can take when starting the process that will allow having an allowance to teach them to be money smart.
How can we do this, how do we teach these little kids who think everything they have just magically appeared in front of them? I know when my daughter was little this was something I struggled with until I came up with a plan. Today, we are lucky because there are several tools we can use when giving an allowance.
Here is a list of a few simple steps you can take to start your kids on an allowance:
Make a plan– Today we have many tools that can help us as parents as we teach our kids to be money smart and to give them responsibility. Think about what it is you want to teach them. Remember to emphasize spending, saving and giving.
Use Available Tools– Download the TD Family Allowance app developed by TD Lab for iOS and Android devices. It is designed to assist parents to teach their children about saving money. It helps them to set savings goals, keep track of allowance tasks (jobs) and track their progress. For us parents, it allows us to assign tasks to each child in the family, track when the task has been completed, and we can also track our allowance payments. The app is fun for kids even giving them rewards for reaching goals.
Chores – There are two kinds of chores in our family, some are chores that come with just being a part of the household. My daughter does the dishes; she is not paid for this chore.
There are also chores are jobs where she can earn cash. This is a great way for them to understand that you earn money by doing a job. Make a job list and either set a certain amount per chore or a weekly amount if all jobs are fulfilled. If you aren’t the type of family to stick to a weekly routine, use the Family Allowance Up for Grabs option to set a rate for individual tasks that anyone can choose to complete to earn extra money.
Piggy Banks and Goal Setting – Provide them with 3 piggy banks. My daughter when she was little had 3. One for spending, one for savings and one for giving. Once they receive their money tell them they have to put it into their piggy banks for safe keeping, teach them that money should not just be left out or lost. If you lose your money, it is gone.
For each piggy bank, we would set a goal. There were saving goals, spending goals and giving goals. When my daughter was young it might have been as simple as her wanting to buy a comic book that week; her first savings goal was for a computer. She saved for her first one. For giving, it was important for me to teach about researching a cause and supporting it with time and money.
Take them Shopping with their Money – Pick a specific day once a month when you go shopping. Let them purchase what they want unless there is a safety issue. Once their money is gone, though, it is gone. As well, do your best not to top up spending trips.
Bank Account – Once your kids are older and have an understanding of money, getting them a bank account is a good idea. I suggest a meeting at the bank to set up an account so you child can learn more about banking, interest and transactions.
Parents, remember once you start giving an allowance be consistent. You like getting your paychecks, after all, correct?
As soon as they can grasp the idea that money is necessary and that it does not just appear or grow on trees, they are on the road to financial literacy, and that is a good thing. We need to remember what we want to teach them as we start on this journey.
*Disclosure: This post is sponsored by TD Bank, as always all opinions are mine.