Starting an Allowance: Money Lessons to Teach your Child

Having an allowance can benefit your child in many ways - as long as it is given with the proper guidance in handling money. Aneth Ng-Lim, corporate affairs director at Citibank, says that communication lines should be open between you and your child at all times. “I encourage parents to hand out money advice along with the allowance. It’s important to let your child know what the allowance is for - say, for lunch or merienda, not for toys or candies that are also sold in the school canteen.”

“The money talk shouldn’t happen only once - it should be  an ongoing conversation,” she adds.  “And make sure you talk to your kids not just about spending wisely, but also about saving and earning money.”

Yes, a regular allowance can teach your child the basic concepts of spending, saving, and money-management early on. Magnolia Alano, a financial planner, says that even if your child brings baon to school every day, you can still give him with enough allowance “for emergency.” Doing so could help strengthen your child’s ability to make important spending decisions (“When should I use this money?”) and take responsibility for his actions.    

The right age and amount
When it comes to deciding on the best time to start giving your child an allowance, it’s really your prerogative. “Every family is different, and giving an allowance is something you decide to do after determining the need for it and what feels right to you,” says Lim. However, most experts agree that it is best to start your child on an allowance only when he understands the concept of handling money already.

“Make sure that the allowance is just right for your child’s needs,” Lim continues. And work with a reasonable amount. “Don’t give too little that he can’t buy the right kind of food he needs, or give too much that he ends up with more than enough funds. This will only tempt him to spend it on unnecessary things like candies and junk food.”

[previous|page|next]

Hansel de la Cruz, dad of four, advises paying a visit to your child’s school canteen to assess how much allowance your kid really needs. “Check out the prices of the food and drinks - what he’ll need for recess or lunch - to learn what is a reasonable and fair amount.”

Lim shares, “I started [giving allowance to] my kids early. I didn’t want to wait until they were in their preteen years because my parents also trusted me with money at a young age. My nine-year-old receives a modest allowance, even if she brings baon to school. It’s interesting to see how quickly she realized that she did not have enough money to buy a small pizza after she bought candies and stickers. I’m hopeful she had learned her lesson, but I am also aware that there are still countless money lessons ahead.”

Money talks
Lim says that a good way to start teaching your children about handling money is to “talk about needs and wants. Even at a young age, children can understand a person’s basic needs as these are taught in school: food, clothing, shelter. You also need to help them discern which kinds of food fall under basic needs (rice and viand) and which don’t (chocolate and soda). Do the same for clothing.”
      
Spend vs. save
Want to encourage your child to save? Make it fun for her. Alano teaches her four-year-old, Avery, to save “by asking her to put some of my loose change in the piggy bank. Whenever she wants something like ice cream and cookies, I make her choose between the two. I don’t give everything right away. I also share this principle with my yaya so we are consistent about what we teach my child.” Putting coins and bills in a piggy bank also gives your child a clearer picture of how money grows.

When it comes to getting your kids into the habit of saving, Lim says, “You can motivate your kids on the rewards of saving, that if they set aside a portion of their allowance every day, they would have enough money after a week or two to buy a book or something they like. Later on, they will discover that saving is a reward in itself.”

[previous|page|next]

Cecilia Sta. Maria-Abalos, 36, a public school teacher and mom to Francessca, 9, says, “Once a week, I give my daughter P50 so she can buy anything she wants. Afterwards, I ask her to make a list of her expenses, which is a great idea because her math skills are exercised, too. If she goes beyond the given amount for the week, she cannot ask for more,” Cecilia shares.

Such practice teaches your child to be conscious of her spending needs. And, like Cecilia, not giving in each time your child begs for more allowance also teaches her that money doesn’t come easily. “As a reward, whatever she saves for the week goes to her piggy bank. We deposit the amount together in her kiddie savings account every two  months,” she adds.

As a final note, Lim encourages parents to also talk to their little ones about giving back. “Show your child that it’s never too early to show charity.”  

 

Image from freeprintablebeahviorcharts.com