Uncertainties in the job and financial markets make it
imperative for parents to teach their children how to manage money.
This instruction should begin at an early age.
Uncertainties in the job and financial markets make it imperative for parents to teach their children how to manage money. This instruction should begin at an early age. Consider the following suggestions:
Preschoolers – Three- or 4-year-old children should be given small amounts and the opportunity to choose items to purchase. They will quickly learn their choice is limited to the amount they have available to spend.
Preteens – Consider implementing a small allowance by age 6 or so. This allowance should be unconditional; i.e., the responsibility to do chores should not be tied to children’s allowances. Children should learn that certain tasks must be done regardless. For extra work, they may be given the opportunity to earn more than their basic allowance.
The weekly allowance should be increased annually. As children age, this increase can be tied into things they must assume responsibility for purchasing (e.g., dates, entertainment, snacks or clothes).
Teenagers – When children become teenagers, encourage them to get part-time jobs so they can appreciate the work involved in earning money. Start discussing longer-term goals such as college. As an incentive for children to save for the long-term, consider matching amounts they contribute to their savings account.
Begin including them in family budget and financial discussions. Be a good example. Show your children how your actions are based on the same principles they must use in budgeting their allowance. By age 18, children should be able to manage a year’s expenses and be capable of saving for higher-cost items.
Throughout this educational process, be supportive and try to avoid the tendency to criticize or control what your children do with their money. Teaching your children how to manage money may be one of the most important lessons you can give them. Contact our office if you’d like assistance.
Doug Herring is a CPA with the accounting and business consulting firm of Bianchi, Lorincz & Co. in downtown Hollister and in Morgan Hill.
