Giving an allowance is a great way to help your children become more conscious about money and allows them to discover the power of saving. You can start giving an allowance as early as first grade, so that they get to have experiences with money when it’s still fun.
Encourage them to take baby-sitting and lawn-cutting jobs, so they can start earning money to add to their allowance. Then help them allocate their allowance. I suggest four categories:
- Tithe: Give 10 percent of their allowance to someone in need.
- Immediate gratification: 30 percent can be spent on anything they want right away.
- Delayed gratification: 30 percent should be saved for more costly items.
- Big dreams: 30 percent on long-term goals, like college, or a trip to South America when they are 16.
Each portion of the allowance has its own purpose and a lesson to be learned.
When you give your children an allowance and the freedom to do anything with it, they will quickly find out about the need to budget and spend wisely.