Tips for Parents: Teach Children About Money 4/30/01

Survive The Souvenir Shop

Family vacations provide memorable moments, but souvenir shops often stress parents.

While parents can encourage children to save part of their allowance for vacation purchases, younger children may have difficulty understanding the concept of saving for the future; they also may not understand that there is a shop at every stop.

To relieve pressures to spend – and teach children a lesson in money management – parents may want to provide a vacation bonus in the form of cash for each child to spend as they wish. Parents can offer suggestions that might be considered in decision-making process, but should not make the spending decision for the child. Children may face disappointment when they see something they might rather have had later on the trip, but should be more able to resist pressures to spend in the future.

–Katey Walker, family resource specialist,
Kansas State University Research and Extension

"Parents often ask how old a child should be before he or she receives an allowance, but there isn’t a one-size-fits-all age that can be recommended. Parents are encouraged to watch for signs. When a child begins to understand that money affords purchasing power, they usually are good candidates for a beginning allowance," said Walker, who noted that children often reach this stage by age four or five.

The amount of an allowance is best determined by considering a child’s age and the resources available. Discussing – and agreeing on – what the allowance is expected to cover also is essential. For example, a beginning allowance for a five-year-old might be expected to cover the costs of a small book, toy, or snack-of-choice. A teenager’s allowance might cover the cost of school supplies, personal grooming products, clothing, gifts for friends, and entertainment.

As a child grows, needs expand and allowances usually increase accordingly. While allowances vary, the need for parents and children to discuss what the allowance is expected to cover – and when to give a raise – is essential at every age. Such discussions are important to the learning process because they help children and teens learn to plan how to cover necessary expenses, Walker said.

Parents are encouraged to suggest spending options or product considerations to guide children through the decision-making process, but should not make a spending decision for the child. Younger children may need more assistance, but teens are likely to ask for suggestions, too.

Developing decision-making skills is essential to money management, and the skills transfer to other aspects of life, too, Walker said.

"If a needed expense is time sensitive – like museum admission for a field trip – then it can be advisable for parents to consider a loan. It should, however, be a loan and not a gift, because it is important for children to learn that if they need to borrow money, they also need to work out a plan to repay the loan," Walker said.

A high-ticket item often provides an opportunity for parents to encourage saving. This can be a particularly important lesson for young spenders to learn – major purchases are a necessary part of life.

Younger children can be encouraged to save a portion of their allowance for a special purchase (like a book, toy, or souvenir on an upcoming trip) that costs more than something their allowance would normally cover.

As children grow older and begin to understand that savings earn interest, special accounts that offer benefits to young savers can be appealing. Parents can encourage saving regularly, but as funds accumulate, children often need less encouragement. Some become quite thrifty, she said.

Financial stresses can begin at an early age. Many advertising and marketing campaigns target children, and there also is pressure from peers to have specific products or brands. While teaching children about money isn’t likely to eliminate such pressures, it can help parents guide children to view financial expectations more realistically, Walker said.

For more information on managing money successfully, interested persons can contact the local K-State Research and Extension office.

K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.