It is very important to teach your children how to deal with money. You can't start early enough with this, it is important to talk to your child about money, to prepare your kid for a good financial future. It of course takes time to teach your children how to deal with money properly, but it is surely worth the effort. When a child as learned how to handle money in a good way, he will profit from this his whole life. Research has namely shown that children that have enjoyed a good financial education will, later on in life, be better at dealing with money and be less likely to get into financial problems.
To teach your children well how to deal with money, you will have to give the good example yourself. Children will learn by imitating their parents or caretakers. When you show them how to do it, this will leave them with the best impression, which increases the chances of financial success in the futre. When you want to teach your child how to save money, you will have to do this yourself as well. And that goes the same for everything actually.
It is smart to start putting money into an account that is in your own name, but designated for your children. The money is of course meant for your children, but by putting it into your own account, you have the freedom to decide when and if you want to transfer the money to your children. Some parents save money to pay for a good education for their children, other parents will give the money to their child when he starts to live on its own for instance.
By giving your child allowance, your kid learns to deal with money and take decisions by himself. You will also offer your children the chance to make mistakes, from which they can then learn. By making mistakes, they will later on be able to deal with money in an intelligent way.
Most children, besides getting allowance, will get a little bit of extra money in between or with the holidays. You should however be careful with this, because children will not learn to pay everything with their allowance because of this. A good way to teach your kid how to handle extra money, is for instance to let your child save that money for a special goal that your child has chosen himself. To let your kid save money and buy something big for it, you will teach them financial planning, with which they can learn that they cannot always buy everything directly, but that you sometimes have to save for it.
Children will handle money differently in different age groups. This is an important fact to keep in mind when planning your children's financial planning.
In principle it does not make sense to give allowance to children below the age of six. Children from this age group are still so young that they are not busy with money at all. Children from this age will spend their monies mindlessly, and they will not think that if they have spend money on product A, they do not have enough left for product B. If you still want to give your kid below the age of six allowance, you are best of putting it in a savings jar. Now and then you can count the money together with your kid, and choose to buy a wonderful present or to save up a little bit more.
Your child will now gain interest in money, and this is a good time to start giving allowance. A child of this age will probably ask for allowance, if he is not getting it yet. He is thus willing to earn a little bit extra. It is not yet smart to teach your kid how to save, because he is still too young to understand the concept of saving. They are now learning calculus in school, in which money is now starting to become a clearer aspect.
If your child is eight years old, you can start telling your kid about ambition, possession and the fun of buying things. This means that you explain how much fun money is. Children of this age often want things with a strong desire behind it, they can be totally focussed on this special box with lego inside for instance.
Children of 9 are capable of understanding what saving means. You can now thus also open up a savings account for your child. It is important that a kid of 9 is still able to spend his money, but saving is becoming more important. You can propose to him to for instance save half of his allowance. By saving the allowance, your child can start saving for bigger expenses.
A child of ten is capable of planning. You can now teach your kid to make a weekly budget, and to save for bigger expenses. It is important to teach your child the value of money, you can for instance help him to find a job. He is not allowed yet to do a real job, but you can help your child to earn some money with his hobby. In this way your kid will learn that he can have fun in his work, and he will learn what he has to do for his money: money doesn't grow on a tree.
Children from 12 to 14 will get more and more interested in money and are perhaps allowed to go shopping and hang out on the streets. Children of this age group are very sensitive to the opinions of their peers, and they are masters in trying to let them buy expensive things for you. Let them not talk you into feeling guilty and keep your opinion firm. Your child needs to learn to take his own responsibility after all. If he wants to purchase more expensive things, then he will have think of ways to earn more money and to save this: then he can still buy these expensive things.
Children from this age group will have many possibilities to earn extra money, but they often do not do this by themselves. Only when you as a parent or care taker does not give any more money, will the child start to think of a job to earn some money. Even if you want to still give your child allowance, you have to think about the things that you would normally buy. Why buy an expensive pair of jeans for a 100 dollars that your child really wants to have, while you think 20 dollars is enough for jeans? Let your child work for the remaining 80 dollars, and when he has saved this up then you can pay the other 20 dollars.
Children (actually adolescents) of 20 years and older should really be able to stand on their own feet. When you as a parent or care taker are too giving, you ensure that your child becomes too financially dependant. Living at home for a long time may be fun, but it is not helping the financial independence that you want to teach your child.
This is of course the most tricky question of all. In general it is advised to start with a little weekly or monthly allowance. As the kid grows older, you can gradually start to increase the amount they get. It is a good idea to talk to parents of the peers of your child. What are they giving their children? Your children will of course start to talk to other children at school how much they are getting, and if the differences between them and their peers is becoming too big they might be getting feelings of unfairness or jealousy. Make sure you are not overdoing it either, when you child is getting way more than the other children, then other kids might be getting jealous of your child which is also not desirable. In the end how much allowance you give them is your choice, just make sure to stay consistent with your other children, i.e. if Ruby was getting 10 dollars a week when she was 10 years old, when the younger child Alex will finally reach the age of 10, he should also be getting 10 dollars. If you do not keep consistent with this, children will not believe that you are fair and they might get jealous of each other as well.