Money management is one of the basic skills necessary to be successful in life
. You can start teaching your kids money management when they are very young by using allowances. They can learn about earning money, saving money and balancing immediate wants with future benefits.
Even before they understand what money is kids get excited when given a coin or two. This excitement is a signal that you can begin to use allowances to explain the concepts of managing money. The amount of the allowance is not important but regularity is.
For a small child getting an allowance once a month will not be seen as a routine event. It will be more like a one off surprise each and every time as their perception of time differs greatly from an adult's. Payment of the same small amount once a week will have a greater impact than a larger amount once a month.
Allowances are often dependent on specific chores being completed. However, this could backfire as the child may decide the payment is not worth the work. Then, not only do you not get the chores done but they miss out on the opportunity to learn about money management. To reinforce the principle that money should be earned you could provide a low amount as a base and then offer additional amounts for specific chores.
Once your child has their own money they can be required to spend it on the extras they so often ask for when you are out shopping. At first they will probably want to spend all their money at once. You should let them. There will come a time when they do not have enough money to buy what they want. And, this will be an opportunity to introduce the concept of saving. If they really want that particular item, they will need to save some money from this week to be able to buy it next week.
As the child gets older you could require that a proportion of the allowance is saved. If this is deposited in an interest bearing account they will begin to learn how money can generate more money. You can also introduce the concept of allowances for specific purposes. These help to educate your children on saving for long term goals.
Allowances are a useful tool for teaching your kids money management. Simple allowances introduce the concept to very young children. More specific allowances and restrictions can be given to older children to teach them about budgeting and investment.