Use allowance to help kids learn money management skills

Parents who dole out cash to their kids every time they're asked may find themselves doing so for a long, long time. Consider using an allowance to help kids learn how to manage money. The allowance can help kids develop the skills to become financially savvy and independent. 

If you believe you can't afford to give family members allowances, try tracking family spending for a few weeks. You might find that doling out money here and there exceeds the total dollars that could be used for allowances for family members. 


 Consider a child's age, maturity level and activities that require financial support. Include your child in the discussion regarding his or her allowance and the expenses it should cover. 

 Decide when and how an allowance will be paid, and then pay it regularly. Do not withhold an allowance as punishment. 

 Encourage a "save some, spend some, and share some" attitude. Talk with your child about saving for specific goals as well as the possibility of setting aside money to help others. Becoming a saver is a learned behavior. 

 Resist the temptation to bail children out if they fall short of their goals or run out of cash. Refer back to your agreement. Knowing when and how much to save and spend is a key lesson in money management. 

 Model responsible financial management. Invite your child to tag along on a trip to the bank or other financial service provider, and then share with them why you are depositing into one or more accounts, such as saving for home remodeling, vacation and/or retirement savings. It is important to also help your child make the transition from money in a piggy bank to depositing money in a financial institution. 

 Model keeping track of credit or debit card purchases in an expense register (like a check register). Or set aside cash so your child can see you spending cash, rather than always using a credit card. 

It is also important to try not to be critical of your child's spending choices.

An allowance is discretionary money, but also is a learning tool.

Making spending mistakes typically helps to build decision-making skills. Discretionary money offers freedom, including the freedom to make spending mistakes. 

Given an allowance, your child may rush to buy an overpriced, yet trendy toy that falls short of their expectations.


The spending mistake can bring disappointment, but will likely have fewer consequences at age 10 or 12 than decades later, when a purchase may be significantly more expensive. 

Ideally, the goal is that by the time your child reaches upper level high school, he or she should be handling 100 percent of his or her own money. 

For additional ideas and ways to help your kids lean money management skills, visit www.kidsmoney.org and www.treasurydirect.gov/kids/kids.htm.



Lynn Little is a family and consumer sciences educator with University of Maryland Extension in Washington County.