Most families have the tradition of giving Hanukkah money to their children. This custom provides an excellent opportunity for conversations about money and teaching tools for managing it.
Allowances are an important opportunity for parents to give children financial training for the responsible money management they’ll need in the future. Through an allowance, children can practice budget management, delayed gratification, future planning, building priorities, and understanding the need for compromise, something we all face in life. Additionally, allowances provide a foundation for defining boundaries and relationships regarding parental financial support, both now when the children are young and in the future.
So how do we teach children wise use of their allowance?
Eight Ways to Light Up Your Child’s Financial Future (Plus One Guiding Principle):
Conversation
Giving a child an allowance creates an opportunity for dialogue about money: money isn’t a crude word, and it’s important to understand what money is, where it comes from, and how we spend it.
Defining the Allowance Framework
Each age has its unique needs. Just as children and their challenges grow, so do the amounts and expenses. When giving an allowance, define together with your children the amount of the allowance and how frequently it’s given.
Rules for Using the Allowance
Every home has its own rules and behavioral guidelines. When giving an allowance, define what the allowance is for, what can be purchased with it and what cannot. Clear definition of the rules will help address common children’s claims like “this is my money and I’ll buy whatever I want with it.”
Need and Want
Allowances are an excellent way to learn spending priorities. There are things we need to buy and things we want to buy. Defining need and want at a young age will help children in adulthood distinguish and prioritize their expenses.
Smart Consumerism
Allowances are an opportunity to teach tools: comparing prices, consumer decisions, conversations about brands and their true value, analyzing sales promotions, and understanding the consumer meaning behind advertisements.
Budget Management
Allowances are a budget that needs to be managed: plan the allowance, know how much there is, what the money was spent on, and how much remains. Each child according to their age.
Independence
Allowances are a tool for children to experience freedom of choice and independence, and an opportunity for parents to practice releasing control. All, of course, within the boundaries defined for allowance use.
Encouraging Saving and Investment
Giving an allowance is an excellent opportunity to teach children a chapter on the value and importance of saving and that proper money management can bring additional money.
Guiding Principle
The rule that illuminates them all: allowances are our way of becoming effective parents who prepare our children to successfully handle their tasks as adults financially and in general. Check at each stage what your goal is on this topic and whether you’ve advanced your children and given them tools to deal with the reality in which they’ll live their adult lives.
Just as we light the Hanukkah candles to spread light and hope, giving allowances the right way illuminates the path toward financial wisdom for our children. This practice is an excellent tool for empowerment and values-based education that will help them build bright financial futures for themselves and their families.
