Money—it moves the world. As parents, we’re entrusted with teaching our children the ways of the world. Money and how we interact with it is a big piece to that puzzle. Many parents use allowances to help teach their children about money. But at which age can that particular lesson start? How much should you give? How should you give it?
Here are some tips to help you start thinking about how to begin introducing money matters to your kids and when.
Ages 2-4
This is the age when they’re really into everything you’re into. There’s a reason why toddlers would rather play with your keys rather than the plastic toy keys. They’re becoming aware of the objects that are important to you. Your keys, wallet, phone, remotes, and utensils all fall into that category. While they are too young to understand the concept of money and what it does, you can begin to give them opportunities to start interacting with it.
Get a piggy bank. Give them your daily spare change and begin a ritual of having them put it into the bank. Set a marker for when the bank will be opened (like a birthday). Count the money together and show how that money can be used to purchase something. At a high level, this starts to highlight the foundational work of money management in its most basic form.
Ages 4-7
This is about when the “can I have this?” conversations while you’re at the store typically start. Once your kid is able to understand that there is a barrier to having things in the store, you can take the opportunity to highlight that money is that barrier.
It may seem young, but it’s a good age to start an allowance. Start small—some may give $1 for every year old they are (i.e. a 4-year-old gets $4 per week). The next time you’re in the store and they’re asking for something, you now have the ability to say, “sure, you can buy it with your money.” Through this exercise, kids will start to understand the value of a dollar. Evaluating what they are willing to spend it on and what they want to save for.
Try making an event out of the weekly allowance payment and doing it at the same time every week. You could set a reminder on your phone, or put it on the calendar. Use the set-aside time to talk about their money and how they want to use it. You can even create ways to help them visualize what managing it looks like. Create 3 jars labeled SPEND, SAVE, GIVE. Let them allot where they want to invest their allowance each week. Don’t be afraid to give them advice—this is a learning experience that will go far later in life.
The goal of an allowance should be to teach them about how money plays a significant role in our lives. Use caution if you choose to tie allowances to chores. For better or worse, chores are a part of life that we don’t get paid for. There’s some work in life that does earn us money, but there’s also necessary work that doesn’t. Try to set up realistic expectations.
Ages 8-13
This is an age where they can start picking up one-time “jobs” that go above and beyond their set chores list. Are there “bigger” things they can take on that can have set rates? Cat sitting for friends? Helping a neighbor weed the lawn? Organizing your closet?
Try to find something that’s related to what they like to do that you might already be looking to pay someone for. Talk about it as a real job. Talk about how much they should charge and make a list of clear responsibilities that define the job as done.
This is a good stepping stone to help prepare them for bigger jobs outside of your control as they get older. They can think about the situation from their perspective as the “employee” and from your perspective as the “employer.” Everyone earns money and spends money throughout their lifetime and it’s important to be able to consider the entire picture.
As with most things, the earlier you can start the better. Giving your children the opportunity to think about and make choices with their money in a safe environment will help set them up for success.
