The vast majority of children are destined for a financial future that differs little from that of their parents. Research has found that the financial future of younger generations can sometimes even be worse due to a combination of societal influence and last of intentional “fiscal training”.
You can change that.
An easy way to fiscally train the younger generations in your family is through the use of an allowance. Yes…the old school allowance.
The benefit of an allowance is that it provides an easy way for families to engage in money talk, and teach accountability and personal responsibility at an earlier age. We get questions about when to start and what method to use. As to “When?”, it will differ by family, but many families start when children can understand how the allowance will work. What method you use for allowance should be tailored to your family culture. Here are three systems to consider.
- Set Dollar System – Uses regular monthly amounts with expectations of engagement in the home
- Reward System – Pay certain amounts for different assigned household jobs
- Income System – Pay for special jobs outside of regular responsibilities (e.g. mowing the lawn, detailing a car)
Coupled with instruction on how to save, invest, give and spend, an allowance system is a powerful tool to have when raising financially sound kids.