Baby Steps

I’ve been asked lots of times: “At what age should I start giving my kids an allowance?”

The short answer is: “As soon as they want to buy things!”

While that sounds like a comedian’s answer, it’s true. As soon as your child shows an interest in money, it’s time for allowance. Usually children are ready for allowance by age 5, but sometimes they can be ready as young as 3 or 4 years old especially if they have an older sibling.

Here are some suggestions for the younger child:

Toddler Play Money – Ages 2 to 4

• Play “store” with a toy cash register = this shows them that money is a medium of exchange
• Start a piggy bank = you can show them how 5 pennies = 1 nickel as you fill the piggy bank
• Delayed gratification = show them that savings gets us what we want. Start with a small item that they want to “save” for and return to the store in a short time span to purchase (maybe the next day or two)

Making Choices – Ages 5 to 7

• Start an allowance program!
• Talk about wants vs needs
• Give your child control over their spending choices and let them make mistakes (Hard to watch, I know, but it’s a good lesson to learn while the stakes are low!)
• Show them how to compare prices and quality of items
• More delayed gratification = help them to set a bigger savings goal. Set up a savings account so they can see their money grow.
• Talk about giving back to your community or kid-friendly charities = kids will learn how good it feels to help others

Take these “baby steps” now and your “baby” will be on their way to becoming a financially responsible adult!