Raising Money-Smart Tweens

Before you offer your tween an allowance, you need to do your homework.

Young boy putting money in piggybank
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For many kids, money just grows on trees. They don't understand where money comes from, they just know how to spend it. The wonder of the tween years is that they provide parents and guardians with so many opportunities to teach their tween independence and responsible behavior. Money management plays a large role in a young adult's new found independence, and your tween will be a young adult very soon.

Here's what parents should know about kids, money management and teaching tweens to be financially prepared.

Money and Allowance: How to Begin?

The best time for a child to learn how to handle money is during the tween years. By the time a child is a preteen, he's usually responsible enough to keep track of money, and because it will be years before he holds down a regular job (besides babysitting, lawn mowing, etc.) allowances can be the best way to get him thinking about spending, saving, and making wise consumer choices.

If you haven't yet considered offering your child an allowance, now would be a good time to do so. If you already offer an allowance, consider the following tips on kids, money and allowances.

Should I tie chores to allowance?

This is a frequently debated topic. On the one hand, you don't want your tween thinking that he can get something for nothing. On the other hand, you aren't paid to clean the kitchen, or pick-up the family room, so why should your child be paid for tackling every day chores?

After all, chores are every family member's responsibility, are they not?

Also, when you tie chores to allowance it can create extra work for you. What do you do when a chore is started but not completed? When your child is the midst of exams do you penalize him for failing to finish his duties? And what do you do when your child is sick and can't get to his chores?

To simplify matters, many parents find that offering a tween a very small base allowance, combined with a chore-for-hire system works best. With this system you pay a very modest allowance, but your tween can earn extra income by tackling bigger projects around the house, such as cleaning out the garage, washing the dog, organizing the pantry, washing the baseboards, etc.

How much should I offer?

Again, this is up for debate, and the answer depends on your family's economic situation as well as what you expect your child to cover with this allowance. The idea behind an allowance is to teach kids money management skills, it's not about subsidizing a lifestyle.

You can begin by offering your child $1 for every year of his age. Add accordingly depending on the circumstances, making sure that there's enough left over for your child to splurge a little, and save a little.

What expenses will my child be responsible for paying?

You'll need to make it clear what expenses your child will be responsible for covering with his new allowance.

Obviously, costly purchases such as your child's wardrobe and school supplies should continue to be paid by you. However, it's not unreasonable to expect your child to pay for ice cream, Nintendo DS games, and other smaller purchases with his allowance. Also, if your child has scout dues to pay or drama club dues, he should probably cover that with his allowance. The cost of uniforms, piano lessons, and anything relating to your child's education (such as field trip fees) should be covered by you.

Up for discussion is whether or not the allowance will cover lunches at school, toys, and souvenirs while traveling.

How can I make sure my child saves part of his allowance?

For many kids, money is something to spend, and the concept of saving is lost on them. This is when you get to define some of the requirements of your child's allowance. Just like banks require certain payment schedules from borrowers, you can require that your child set aside a percentage of his allowance for savings. For example, if you pay your child $12 a week, you can require that he put a third of his earnings into savings, and another third into the church collection plate, or to donate to a charity of his choice. The remaining $8 would be his to spend as he pleases.

To help your child better experience the growth of his savings, pay your child in one dollar bills, and make adding to his savings account a weekly ritual. You can offer a jar or box to store the savings in until you have time to take them to the bank for deposit.

Incentives can encourage tweens to keep saving. Sit down with your tween and set a savings goal for him, it could be $100 or $200, or more. Once your tween achieves his goal, offer an incentive, say $10 or $15, to add to his savings account. This will help keep him motivated to save.

When should I stop offering an allowance?

Teaching kids money management skills takes time. But when your tween begins earning money on his own on a regular basis, it's time to pull back on his allowance. You can do this gradually, offering less and less until the majority of his income comes from his own hard work. It wouldn't hurt to continue offering work-for-hire opportunities, to help your child earn a little extra income and to help you get through that family "to do" list.

Keep in mind that allowances aren't really meant to subsidize a lifestyle. Rather, they're a means to help your child learn about money management, so that when he has his own income, he will be in a position to manage it responsibly.

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