With the upcoming family-oriented holiday of Chanukah, we are faced with the expectations of gifts and the challenge of imparting financially responsible values and behavior to our kids.
One way to teach our kids financial responsibility, on Chanukah and all year round, is by giving them allowance or pocket money. Giving allowance generally raises concerns about whether kids will actually benefit from the education or use the money for things they don’t need. Giving allowance requires thought and dialogue with our kids, regarding rules about spending and making wise independent decisions.
8 financially responsible principles your children can learn from receiving a regular allowance:
- Independence – A small amount of money (within the limits defined by the parents, of course) gives children a sense of independence, control and maturity. Independence comes with responsibility and these feelings can have a positive effect on their behavior in many areas – at home and at school.
- The Value of Money – When children immediately ask and receive money from their parents to buy candy or a toy, they do not really understand the value of the money they received. Children that receive a set amount of pocket money at a designated time, can gain a new understanding of its value, think twice before spending it and take into account considerations such as the price of the product they want to buy relative to the amount of pocket money they received.
- Concept of Budget Management – Pocket money is a great way to teach kids the concept of budgeting. They will recognize the principle that money is gone once it is spent, and think about what they want and need, and prioritize what to buy within their limits.
- Using Wise Consumerism (and Mathematics) – How much do things cost and what items on your wish-list can you buy with the amount you have? Do you need the brand-name or is there a cheaper option that will leave you with some money leftover? These are some questions that will force kids to think about spending wisely, and of course require them to add, subtract, and divide.
- Delaying Satisfaction and Setting Priorities – It is reasonable to assume that in the first few weeks the children will spend their pocket money on the day they receive it and buy the first thing they see. Slowly, and with your guidance, kids will begin to realize that if they prioritize and delay their instincts for instant gratification, they can buy something bigger.
- The Importance of Saving – Allowance is a great way to teach kids about the concept of saving money. If they save up some of the money each month, they can eventually buy something more expensive and realize their larger dreams. Experimenting with savings is a valuable tool for shaping responsible financial management conduct in the future.
- Sales and Promotions – Learning to maximize the money they have is a great lesson for shopping wisely. Looking for coupons, discounts, or buying things on sale will teach them about getting higher value for their money. It is also an opportunity for you as the parent to teach them how and where to find discounts and promotions, read the fine print and compare offers.
- Price Comparison – Under your guidance, your children will get used to checking the price of the product they want in several stores. This will allow them to purchase it at the cheapest and most cost-effective price for them. A price comparison process is an important skill that will serve them in every field.