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Kids and Money Part 2

We can all agree that kids are expensive.  According to Business Insider, the cost to raise a child for one year as of 2024 is over $25,000.  Yes, that’s for just one year!  The majority of those costs are childcare and transportation, as well as necessities like food, shelter, and clothing.  All this makes it incredibly important to have clear expectations that outline the amount of money that can be spent each week.  While it is a natural expectation for parents to pay for the necessities in life, it can become a gray area when kids start asking for things at the convenience store or ask you to buy them something on Amazon.  

When talking with my friends, family, and coworkers, I often see a big struggle when parents have no real plan for how money is spent on their kids.  And big struggles with spending can cause major stress for parents.  Some examples of guidelines that parents can implement are: 

Give a weekly allowance - While a weekly allowance might seem a little outdated, giving your kids money they can spend and learn to manage can be incredibly helpful.  It puts the decision-making back on your child.  If they want to buy something, they pay for it themselves if they have enough money or are forced to save up for it if they don’t.  

Provide opportunities for your child to earn money - Does your lawn need to be mowed?  Perhaps you could offer your child the chance to take over that responsibility in exchange for money.  Or you could make a list of jobs that can be done around the house with set amounts of money that can be earned for each task and you post it on the fridge.  There’s even a popular app right now called Greenlight where parents can add the money their child earns from doing jobs around the house right to their debit card.  Whichever way you choose, offering the chance for your child to earn money is a great start to teaching financial responsibility.  

Set clear boundaries about spending - Come up with concrete examples of things you, as parents, pay for and what your child is expected to pay for.  This will be different for each family and could even differ from child to child.  However, when everyone in the family knows the expectation in regard to who pays for what, it can make it much simpler. Come up with scenarios and solutions that make sense for your family and then stick to them.  

Teach your child to spend/save/give - There’s an overwhelming amount of advice out there about how much a child should spend vs. what they save vs. what they give to others.  I’m not here to tell you what percentage of your kid’s money should go into each category, but I am here to tell you that they should be taught about the importance of all three.  Teach your child to spend their money on things that are important to them and how to save and watch their money grow over time.  Teach your child to give a little bit to others in need, even if it’s just change.  Find the balance that works for both you and your child so that they have a well-rounded approach to managing their little bit of money.  

Let them make mistakes - Yes, you read that correctly.  Let your child manage their own money and make mistakes.  It’s the best way for them to learn and it’s better to learn those lessons now when the stakes are small rather than later on in life when the stakes are much larger.  Did your kid forget their wallet at home?  Then don’t loan them the money to buy something while you’re out.  Did your kid get to the register to pay only to realize they didn’t have enough money because they forgot about sales tax?  Have them put something back or not buy the item at all.  Be patient and encourage them but also don’t be afraid to let them fail.  That’s how kids learn smart money habits. 

Next time will be Part 3 in this series and will focus on budgeting and the role your kids' activities and needs play in your monthly budget.  We’ll also talk a little bit more about how to set financial boundaries with your children so that the family finances stay on track. 


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