Back-to-school time can be a very expensive time of year. That makes it a great opportunity to help children learn to handle money, according to LSU AgCenter family economist Dr. Jeanette Tucker.
Before school starts, families are busy buying new clothes, shoes, book bags and school supplies. After school starts, even more expenses appear: supply fees, school lunches, after-school snacks, fees for extracurricular activities – the list goes on and on, Tucker says.
“Because these expenses are child-directed, and children have already been spending money from a very early age, this is a good time to help them learn to use it wisely,” the family economist explains.
Tucker says to begin by taking a look at where children get their money. It’s usually from one of three sources: cash gifts, earnings and allowances. Each of these can be used to teach children money management skills.
Cash gifts, often received on birthdays and holidays, are “surprise” money and shouldn’t be included as a part of day-to-day expense money. Tucker says children should be given leeway to spend it as they wish, but parents and children can discuss ideas for how the money can be used.
Earnings may be generated at home or from jobs outside of the home. Many children are paid money for extra work they do around the house. The amount received for various tasks should be agreed upon by the parents and the child.
When children are old enough to work outside the home, Tucker says they still need guidance in developing wise money-management practices. “Teens should begin developing longer-term financial plans and an adult awareness of money, work, time and their own needs versus their wants,” the family economist explains.
An allowance is a child’s share of family income, and the child should be allowed to use it as he or she chooses on certain defined expenses. An allowance provides hands-on experience with managing money at an early age.
“Children can plan their spending and learn to set some money aside for future use,” Tucker says. “Allowances can help children learn that money is limited, that income must first cover needs and that the family’s financial situation affects the amount of money each member can use.”
An allowance should be enough to cover necessary expenses, leaving some money for the child to spend as he or she chooses, Tucker advises.
When starting an allowance, parents should teach their children how to set up a budget or spending plan, keep records and set money aside for savings, Tucker says. As parents help their children develop a plan for spending their allowance, they should encourage them to plan to save, spend and share portions of their funds. Be sure and gear the information to the age and ability of each child, she stresses.
Editor: Mark Claesgens