Lessons of an Allowance

Teaching children to manage money is sometimes challenging, but my husband and I have found several methods that have worked for our family.

As each of our children entered first grade, we began paying them an allowance. For each child we also held a special family home evening in which we explained the importance of budgeting the allowance. At the same time, we gave our children different containers marked “Tithing,” “Savings,” and “Spending.” We used a contribution envelope for tithing, a glass bank for savings, and a small cardboard box for personal spending money. We also found that giving allowance in coins for the first few months helped make this budgeting method easier for each child to understand and follow.

When our children had saved the minimum amount required to open a savings account, we made it a special occasion to break their glass banks and take them to our bank to open accounts in their names. Each time a child saved $20, we added it to that child’s saving account.

Allowance in our home is not based on behavior or academic achievement. We have used it strictly as a tool to teach basic budgeting principles rather than as a tool to reward or discipline. To encourage saving, we give our children their allowance on Mondays rather than near or on weekends, when they are more likely to spend it.

When our eldest son neared age 12, we held a budgeting session with him each month to help him learn more about controlling his own finances. We reviewed the coming month with him and then helped him determine his expenses. We gave him a small notebook in which to record his expenses and then helped him budget his funds to cover them. As the other children turned 12, they too received similar help and encouragement.

Of prime importance in teaching our children to manage finances is allowing them to see and even participate in the budgeting sessions my husband and I conduct for family matters. It helps them see that we also have financial decisions and must prioritize and make choices.

My husband and I are by no means perfect in estimating the financial needs of our family, but by working together we can usually find a way to solve the problems we have. We can see that our children, though at different levels of managing their personal finances, are establishing sound lifetime habits.—Margo Johnson, Salt Lake City, Utah