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  • Kids who Receive an Allowance have Lower Financial Literacy Scores, says Expert

    One financial expert explains why giving your kids an allowance may not necessarily be the best option to teach him about the value of money.
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    In the 2000 survey by the Jump$tart Coalition for Personal Financial Literacy, it was found that high school students who didn’t receive an allowance got the highest score, an average of 52.5 percent, albeit these were considered a failing grade. Mandell said this is possibly so because kids who don’t get an allowance are forced to talk more openly about finances with their parents, meaning, they would need to justify more the need for certain expenses. 

    "Kids have to talk to their parents to get money from them and offer some sort of explanation. 'I need it for car fare or books. I need it to go to the movies,'" says Mandell. "And the parents at least have the ability to interject or even withhold the funding if they don't think it's appropriate."

    Surprisingly, those who would receive an allowance got even lower scores, getting an average of 49.1 percent.

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    One fourth of these students, who would receive an allowance without having to work for it, didn’t want to go to college, and was deemed less likely to hold a paying job.

    Allowances per se are not without merit, but there should be sufficient discussion with the parents in order to enlighten their children on how they manage the family expenses. The sad part is that most parents are too busy in these times to sit their kids down to talk about such matters, that the norm is more to provide the allowance without an explanation.

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    Explained by Mandell, “Allowance systems are effective only when they afford the possibility for discussions about finances within the family, such as why and how families make the financial decisions they do. And even then, the conversations could be effective on their own even without giving over the money. Unfortunately, very few parents today have the time, patience, expertise and willingness to have the correct conversations with kids. So, allowance continues to be mishandled. Given the choice between a mishandled allowance and no allowance, I’d choose no allowance every time.”

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    You may also want to read:

    5 Important Lessons Young Kids should Learn about Money 

    3 Ways to Teach your Kids How to Save 

    Teaching Your Big Kid the Concept of Money 

    When was the last time you talked about money matters with your kids? What’s your approach? We’d love to know. Let us know by leaving a comment below.

    Sources: 

    January 13, 2012. Eileen Ambrose. “Will giving children an allowance make them smarter about finances?” articles.baltimoresun.com 

    February 1, 2012. “The New Science Behind Your Spending Addiction” themoneyacademy.wordpress.com 

    February 15, 2012. Dan Kadlec. “Why Giving Your Kids an Allowance May Not Teach Them Anything” moneyland.time.com 

    Photo from sxc.hu 

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