Whether your kids’ future includes homeschooling or not, there is one topic best taught in the home. Allowances make the perfect subject for homeschooling. And the most qualified person to teach your kids about money is you.
Teach? Finances? To my kids? No way. What do I know about compound interest, investing, loans, credit, return on investment and other financial topics?
Relax. Kids don’t need to know any of that stuff to make decisions about allowances. After all, they are not managing thousands of dollars or taking out a mortgage.
Only you can provide a hands-on money experience in your home. You can even start before your kids enter school.
By age 3, your kids can grasp basic money concepts. By age 7, many of their money habits are already set.
School financial literacy classes, if available, provide knowledge about money. But your kids will not develop any hands-on skill in school because schools can’t provide real money.
Why are parents best at teaching kids about money?
Simple. As a parent you have everything necessary to give your kids the best money experience ever. Allowances, as explained in The No-Cash Allowance, sets up a financial education that continues through high school. Your kids gain years of money management experience to carry into adulthood. Book Excerpt: A new way to look at allowances
When your kids want to ride a bicycle, play piano, basketball, or drive a car you provide the necessary tools, required lessons, and cheer their success. As a result, your kids gain mastery of a skill through hands-on practice and learning from their experience. They will never learn a skill if parents control the tool, e.g. piano, basketball, bicycle, or car.
The skill in money management is learning to make reasoned decisions. However, descision making is not an observable skill like playing piano, sports, or riding a bicycle.
Money skills are developed at home
When we hand over complete control of money to our kids, we give them the freedom to gain wisdom. A $10 mistake by a kid is a gentle lesson compared to a maxed out credit card as a young adult.
You knew your kid would get some bumps and bruises when you let go of the bicycle, but you also knew you had to transfer control and become a spectator.
Parents are faced with many decisions while guiding their children toward adulthood. Giving kids total control of their allowance is one of the safest and most effective things parents can do. Take comfort in the fact, that kids cannot make catastrophic mistakes with money while they are growing up.
Instead, they learn from each decision. And kids love being in charge of something as essential as money.
A family learning experience
Because the tool is money, think of your family as a corporation. You are CEO and your kids are department managers. You provide funds according to their age and activities while granting them complete control of the decision-making. They manage all their funds while you review and discuss their account.
The big bonus for parents is that a no-cash allowance is not a subscription or fee-based system. Other than the special offer for the book, there is no additional cost to you. What you are doing is transferring control of a small percentage of your family resources to your kids. Good news! This is money you would spend on your kids anyway.
Over the years money will change while your family shares the experience and learns together. In addition, when kids own their money, conversations become easier and more effective.
When kids are in charge, the system is self-sustaining because the kids are responsible for tracking their money, not the parents. Another thing to cross off your to-do list,.
A reliable process
In summary, a no-cash allowance provides a consistent process. Kids are in control of their money, not parents.
A no-cash allowance also gives your kids years of practice managing money as a number. Most transactions today are entirely cashless. Money is electronically transferred as numbers in accounts. Learning this skill is essential for kids before they become adults.
In teaching kids about money, there are two parts, process and principles. Our children need to know how to manage money as well as why.
As parents you give them principles to guide them. You teach them to have a moral sense to pay obligations on time. Your kids become accountable for their decisions.
Start a no-cash allowance now
The three essentials in providing allowances are money, control, and responsibility.
- Provide money regularly, with opportunities to earn more
- Allow kids to have complete decision-making about their money
- Assign spending responsibilities for child to manage
As parents, you are the best people to teach your kids how to manage money. Use a guidebook like The No-Cash Allowance and adapt the system for your family.
Trust yourself to give your kids control of their money. Be prepared to say, “I never knew my kids were so capable.”