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By Melissa Green | Citizens Bank Staff
Providing opportunities to earn an allowance is a great way to teach kids how to spend and save. A University of Cambridge study found that people form many of their financial habits by the time they’re seven years old. So, with the right parameters and meaningful conversations, an allowance can be an awesome teaching tool.
Here's what to consider if you’re trying to figure out the best way to help your kids earn an allowance.
Experts agree that kids ages three to five understand the difference between needs and wants, so that may be a good time to introduce an allowance system. This way, money management skills become a part of their lives very early on. The sooner they learn, the more likely it will stick with them as adults.
Depending on your child’s age, there are a few ways you can give children opportunities to earn an allowance. Additionally, the older they get, the more they can learn about financial responsibility.
All in all, it’s a fairly simple concept. If the child meets the predetermined requirements, they receive the agreed upon allowance. If they fail to meet the predetermined requirements, they don’t get the money.
Pro tip: Keep in mind that chores rewarded with money should be separate from family chores—those things your kids should do just because they’re part of the family.
Even in a digital world, it’s a good idea to teach children about physical money. There’s an emotional connotation attached to watching your piggy bank fill up, or having to surrender money for a purchase. That lesson may be missed if they’re only using a family finance app like FamZoo. For children with smart phones, a chore or allowance app may be a fun tool in addition to handling physical money. Additionally, children with money in their pocket typically want to spend it, and quickly. As a parent, you’ll have a lot of teachable moments regarding impulse purchases and delayed gratification.
Providing an allowance is more about teaching personal finance than it is giving kids money because they want it. Allow them to make mistakes, and have honest conversations about spending and budgeting. Learning good money habits today will serve children well throughout adulthood.
When that piggy bank starts to fill up, open a joint savings account with Citizens Bank. A savings account allows your children a safe place to set aside money. As they get older, you could encourage them to contribute to a college savings account. For more information about our savings accounts, call 1-877-360-2472 or open a savings account online today.
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