By Sheba Siddiqui @shebasid & online at www.shebasiddiqui.com
The First Step In Teaching My Children To Be Financially Responsible
I’ve always been a firm believer that financial debt is the enemy. I don’t spend more than I can, I’m not embarrassed to state when I can’t afford something and I never, ever, EVER carry a credit card balance. This, to me, is the ultimate sin.
If I know I won’t be able to pay off the credit card balance in full when it’s due, I won’t make the purchase. Be it a vacation, a trip to Costco (best place on earth) or something wonderful I really want for myself. It’s not happening until I can afford it.
I take finances very seriously. My husband and I have a financial meeting once a month. It gives us a chance to catch up on what’s going on with the household, where we’re spending our money and how much closer we are to our financial goals.
We also ran to the bank as soon as each baby was born (I now have three little ones) and opened up RESP’s and individual accounts for all of them. Any birthday money, government money or Eid money they get goes straight into their accounts.
Recently, my five-year-old has taken an interest in coins. He loves pennies and is always asking to keep the coins he finds around the house. I gifted him and his brother a coin bank each and they love putting coins in whenever they find them, which made me realize that it may be time to incorporate an allowance. I believe my financial practices partially stem from my parents giving me an allowance from a young age.
I’ve decided to start my first lesson regarding money with: nothing comes for free. Each of my boys, ages three and five, must complete some basic chores every week (making their beds and putting their dishes away after every meal) to receive their allowances.
So far, they love it! Every morning, they ensure their beds are made, they remind each other to clear the table and actually look for extra things to do around the house. It’s funny to listen to them advise one another on what they should buy with all of their money. I suspect the first time they empty out their banks for that dream purchase and realize nothing is left, they may not be so quick to spend it all.
Money management maven Gail Vaz-Oxlade says on her website at www.gailvazoxlade.com that a child should earn their age in allowance. So if your child is 10 years old, they should get $10.00 per week. You should also be teaching them to save roughly 10 percent of their earnings in a long term savings plan.
Vaz-Oxlade also states that your child’s financial needs will change around age 12 and it’s important to come up with a spending plan together. She says on her site, “To establish how much your child actually needs, let him list all his ongoing expenses, including things like gift purchases, video rentals, and transportation.”
Vaz-Oxlade believes the value of giving a child an allowance allows them to experience money and develop a healthy relationship with it that can last a lifetime. On her site she writes, “Money is a part of life; it’s a tool that helps us to acquire the things we need and want. So teaching about money – what it is, how it works, and how to manage it – should be done as part of all the other lessons we give.”
I’m hoping the idea of an allowance teaches them to be responsible with their money. I hope they learn to understand that money doesn’t come easily and everyone must work hard to earn it, save it and be careful what they spend it on. I also hope I can teach them that debt is something we should all stay far away from, or at least make a priority to be paying off.
The first step in my children’s relationships with finances is going to be their weekly allowance. While teaching them the value and importance of money, I also want them to realize that it’s never the most important thing in life.
DO YOU GIVE YOUR CHILDREN AN ALLOWANCE? DO YOU THINK IT WILL HELP THEM BECOME MORE FISCALLY AWARE?
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Great article Sheba. We have 2 teenagers and have been giving them allowance for about 7 years. As they are both in high school now they each receive $20 per week. They use this money to buy lunch, outings with friends, and shopping, it has taught them to save for what they really want and to budget that weekly allowance to last them the whole week.
The allowance also saves me money as they’re not asking for money every other day.