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There’s nothing more sobering for a youngster than experiencing the consequences of unwisely frittering money away so that there’s nothing left when something they really want comes along.
I’ve found that the best stance to take then is to be sympathetic and offer to help them draw up a savings plan, always resisting the temptation to bail them out. Bailing them out is the top of a very slippery slope. When their money’s gone, it’s gone.
To start their savings, there’s nothing like an old-fashioned piggy bank to put it in. Open a savings account when they’re old enough to understand how a bank works and that their money isn’t being taken from them.
They should always take part in the banking process, with free access to their bank statements so that they feel in control of their savings. It can sometimes take a while to fully understand that, although there are no notes or coins, they still have the money.
Encourage savings by matching dollar-for-dollar the amount banked each time or by adding our own 5%-10% interest to whatever’s in the piggy bank at the end of each month.
Older children can be helped to make a purchase plan for something they really want. Show how weekly savings add up. Initially, the goals should be short-term while they learn, otherwise it can feel like they’ll never be reached. Maybe offer an extra incentive by making a contribution towards the purchase, for example $5 for every $20 saved.
We should make an effort to be consistent about when we pay the allowance and never be tempted to raid their piggy bank when we’re short of small change. If we need to, it should be with their permission and always with generous interest paid for what we borrow.
It’s important to be clear in our own mind, and make it clear to our youngsters, just what we’ll be expecting them to use their allowance for and what we’ll still be providing. This is particularly so from around 10-12 years upwards when they start to become more independent.
Are they to pay for clothing (all or just leisure), all entertainment, only non-family entertainment, family holiday spending, lunches, school trips, sports costs?
We should regularly review the amount of the allowance, or the formula we use, to make sure we’re being realistic in our expectations. If Teen wants an increase, ask them to make a case, which could include a written budget.
And the bottom line is always: when the money’s gone, it’s gone.