Setting up an allowance for children is often how they become educated about what money means. In order to influence future decisions when it comes to finance, having a monetary allotment while young affects their actions in grown up life. It gives them the opportunity to appreciate what happens when money is stowed away or spent immediately.
Because children see parents using credit and debit cards, they have no clue as to how money is earned. Make sure they comprehend the money cycle, so that they understand the money spent comes from hard work and a paycheck.
Each family can decide when a child is ready for spending money. Insure he or she can count, add, and subtract so that there is meaning to what is spent. Kids should be allowed to pay at the cash register while parents watch to make sure they know how to count out what they receive as change.
Just as parents cannot spend money carelessly, a child should be given the chance to learn how to have fun, while saving for a bigger picture. When they are given money that is not specifically theirs or assume it comes from a card, it has no set spending guides. They will continue to spend recklessly. Given a certain amount that is their own and advising them that it will be all they get, helps them understand money does not come from an endless supply.
Start by opening a savings account and taking the child to the bank to make regular deposits of a certain percentage or dollar amount educates children on money management. Many are excited to see how money grows while in a bank or even if allowed to invest in CDs or money market accounts.
It is great to give out an allowance for children. Give them money to spend and observe what they do with it all. These sorts of lessons are a good way to curb bead habits and prepare them for a world in which they will be responsible for their finances.