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How an Allowance Helps Children Learn About Money

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Allowances can help teach children about money.Allowances can help teach children about money.
Allowances can help teach children about money.
Allowances can help teach children about money.


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This is the VOA Special English Economics Report.
Many children first learn the value of money by receiving an allowance. The purpose is to let children learn from experience at an age when financial mistakes are not very costly.
The amount of money that parents give to their children to spend as they wish differs from family to family. Timing is another consideration. Some children get a weekly allowance. Others get a monthly allowance.
In any case, parents should make clear what, if anything, the child is expected to pay for with the money.
At first, young children may spend all of their allowance soon after they receive it. If they do this, they will learn the hard way that spending must be done within a budget. Parents are usually advised not to offer more money until the next allowance.
The object is to show young people that a budget demands choices between spending and saving. Older children may be responsible enough to save money for larger costs, like clothing or electronics.
Many people who have written on the subject of allowances say it is not a good idea to pay your child for work around the home. These jobs are a normal part of family life.
Paying children to do extra work around the house, however, can be useful. It can even provide an understanding of how a business works.
Allowances give children a chance to experience the things they can do with money. They can share it in the form of gifts or giving to a good cause. They can spend it by buying things they want. Or they can save and maybe even invest it.
Saving helps children understand that costly goals require sacrifice: you have to cut costs and plan for the future.
Requiring children to save part of their allowance can also open the door to future saving and investing. Many banks offer services to help children and teenagers learn about personal finance.
A savings account is an excellent way to learn about the power of compound interest. Interest rates on savings can be very low these days. But compounding works by paying interest on interest. So, for example, one dollar invested at two percent interest will earn two cents in the first year. The second year, the money will earn two percent of one dollar and two cents, and so on. That may not seem like a lot. But over time it adds up.
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Comments page of 2
by: Le Trang from: Hanoi, Vietnam
12/11/2012 11:39 AM
I think Vietnamese parents can learn a lot from this article. Most parents in my country give children allowances for snacks or toys without teaching them how to use money consciously. As pocket money may help them teach children very important lessons, they should get more serious about giving allowances and pay close attiention to how the money is spent instead of paying for whatever their children ask for.

by: canh from: vietnam
12/07/2012 4:02 AM
thank you for writing this useful article.i think that how to teach children about money is necessary.when a child known spend and save money,he can have a good plan in his future.and me,when i was a young i usualy save money to help my friends.and how allowance helps children learn about money need to be popular around the world(i write english is too bad,i hope someone can help me,thank you very much!)

by: Thịnh from: Đà Nẵng- Việt Nam
11/30/2012 12:11 PM
i think this article is very useful. we have to teach them how to spend their money, and save money.
Allowances give children a chance to experience the thing that i can do. besides, we can also control the actions of children.

by: frageenawia from: UAE
11/28/2012 9:11 AM
I think teaching our children the value of money or how it should be spent is necessary

by: Jane from: Australia
11/28/2012 2:16 AM
the article is so helpful in the way to teach children how to spend with their money. we need to teach them at the early age to help them aware of the importance of using money rather than spending on unneccessary things. Money is more value if they use it in useful way. it's a economic lesson to manage their expenditure and explore the charistic of children in the way they spent.

by: Yang from: Canada
11/27/2012 2:11 PM
Financial conscious should be set up when one is still young.In this way,people will know how to manage their money in the future and they can also control their purchasing desire.

by: Tak from: Japan
11/26/2012 2:48 PM
The family's management or education will be required to give a chance to learn about money by giving allowance to the children.

11/25/2012 5:04 PM
Thank you very much for your programme about training children preserve money for future use. By dealing with the allowances they get a special resposibility to imitate the adult how effectively the money can be spent. They spend it with care and after lot of thinking unlike the adults. I think their minds start dreaming about new things and this thinking, in later life, may help them spend money in the most useful way and the importance of preserving it to be spent in an emergency. Thank you.

by: Kaoutar from: morocco
11/24/2012 7:49 PM
I like very much this article
I remenber when I was a child, I was always save my money to buy some games when 'Achourae' (is special holiday in muslim country)

by: Yoshi from: Sapporo
11/24/2012 12:27 PM
It's needless to say important to teach the worth of money through in one way offering children allowance. This is my simple question that monetary economy would continue forever? Is it the best way to manage economics and our lives? Isn't there any evolution of other economical system? Money is very convenient to get anything we want, yet at the same time, money is the main cause of crime even for a sensible adult.

Comments page of 2