The controversy continues – Pay kids for grades? Pay them to do chores? Pay them an allowance? Some say yes, others a stern “No!” What’s a parent to do? Well, those questions are best answered by you. But let me shed some light on the issue to hopefully guide you in making a decision.
Kids need to learn lessons about money BEFORE they get their first real job. How else will they learn the value of it? Ask anyone what they regret most about money and many would say that they didn’t learn enough about it when they were younger.
As adults, we crave knowledge. Knowledge about money, credit, debt, investing, personal finance, everything! So, if the lessons were not given to you as a youngster, why deny your kids a head start on the matter? Some may argue that kids need to be kids – they shouldn’t be bogged down with adult issues. But as the first true and only life-long teacher your child will ever have, money lessons are the most important ones they’ll learn as they ride the roller-coaster of life. That’s why they deserve to be taught about money as early as possible, and their best teacher is you!
So, what does it mean to pay your kids first? It doesn’t mean put their needs before saving for your retirement. We know that as single parents we need to pay for our future and take time out for ourselves. Paying kids first means exposing them to the basics of money and money management as early as possible. How? Whether you pay for good grades, outstanding behavior, or completion of chores is your choice, however, they need to earn money in order to learn how to manage it. Giving allowances is an easy way to lay the foundation, as long as dishing out free money is OK with you. Working for cash is a lesson about accountability and teaches what the future holds – no work, no pay. If they don’t work hard for good grades, they don’t get paid. Chores done poorly or improperly? Then pay suffers too. The best argument for payment to kids is that we all work for something, why shouldn’t they? So, choose your reward system, then give your kids a job.
Once they start earning money, they need to understand the difference between earned income and expenses. If they are like most, they’ll quickly learn that earning pay is hard work and may choose to be innovative in order to generate passive income.
Then, lessons can focus on the four pillars of financial responsibility:
- Saving money (pay yourself first)
- Spending on needs then wants
- Sharing, or giving to charity
- Investing (learning to generate passive income)
Now of course, the depth of information provided depends on the maturity level, not necessarily the age, of the child. As parents, it isn’t surprising to notice that sometimes the youngest child may grasp concepts better than the older ones. It just depends.
The goal is to use this as an opportunity to teach them about concepts such as delayed gratification (saving for something), setting financial goals, budgeting, and being responsible with money. Let them open a savings account at a local credit union and make monthly visits to it so they can fill out transaction slips – make deposits and withdrawals. Opt for paper statements so they can monitor their account and practice reading financial statements. The possibilities are endless! They’ll be happy and feel proud that they are watching their money grow. Better yet, you’re giving them a foundation for life that most schools don’t, and probably shouldn’t teach, since you want to make sure they learn the money values you practice as a parent.
This is just a tip of the iceberg of what paying your children can do. It can also help them understand the reasons why we sometimes say no when they “want” something new.
So how do you teach your kids about money or what do you think you’ll try? Share in the comments below.
Happy saving! Live well!