Money for a little toddler is not the most important thing in the world. But as children get older the worth of money becomes more and more apparent. At first to a six-year-old the most they will ever want is $15 to spend on a stuffed animal or toy. To an eight-year-old they might just want $20 to spend on trading cards, or a soccer ball. To a ten-year-old the might want between $40 and $50 to spend on a video game. But your tween would probably want to spend over $1,000 on almost, anything if you let them: computers, video games, cell phones, skateboards, and ipods-the list could go on. I think you get it, as a child grows so does the amount of money needed to satisfy their needs. Does that mean you should just give them everything they want? No it doesn’t. Kids need to learn to save money, it’s a life-skill!
Allowance: kids should get allowance. Starting at 7 years old they should get 1 quarter for every year they are old, each week. So when they are 7 they get 7 quarters each week, when they are 8 they get 8 and so on. You should be enthusiastic with your child about how much money they have saved. I remember when I first got a bank account I brought my wallet (my dad got it for me on a business trip), at the end they asked me if I wanted to make a starting deposit and I proudly produced a twenty dollar bill, like it was the only one in the world, and handed it to them. I was so proud of myself and was happy for the rest of the day.
Throughout my years my dad started to give me extra interest for the amount of money I had in the bank. It started at 5% a month. Eventually when I saved up to $500 my dad said the interest rate was going down to 2% a month. Now I am the proud owner of over $1000, and my interest is down to 1% a month (still a lot for bank interest).
There are certain, big, items that my parents buy over the years: bikes (although from now on I have to pay for them), a laptop when I go into high school, and a cell phone in 8th grade, when I redo my room my parents pay for the new furniture (but I wonder how long that’s going to last).
Kids don’t seem to like earning their money. In my opinion, that is because they have whatever they want-or that you give them whatever they want. but it also could just be that money isn’t their highest priority. The way to get them in the habit of earning money is whenever they want something that costs a reasonable amount of money tell them “you have your own money, if it’s worth it to you then you can buy it.”
If you have a pet or other animal that gets hurt and the treatment is expensive you can tell them that they have to pay for it out of their own savings or if they don’t have much savings say that they will have to pay for half of it. If they say yes, when you get home, say that it’s ok and that you will pay for it-but only if they say yes. The main reason that you would do this is to make sure that the pet or other investment is really worth it to them, and you aren’t wasting your money on a poor investment.
If you want more information about kids and money from a grownup, here’s a book to check out: Kids and Money (Bloomberg Personal Bookshelf)
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