What to Do When Your Kids Ask for Money

Here’s a multiple-choice question for all you parents. What do you say (or want to say) when your kid asks for money?

A.      Why do you need money?
B.      Do you think money grows on trees?
C.      You just want money so you can go blow it at the mall, right?
D.      Go ask your mother/father.
E.      All of the above

Now suppose your kid said, “Can I learn to ride a bicycle?” or “Can I learn to read?” or “Can I learn to play basketball?”

No doubt, your answers would have a different tone entirely. But in each case, isn’t your child asking you to help them learn a skill?

Most likely, you are already encouraging your kid to read by buying books and reading to them. You are encouraging your child to ride a bicycle by getting them a tricycle, then a bike with training wheels. You encourage sports or music by signing them up for lessons and buying them the equipment they need.

So what can you do when your kid asks for money? Start by take a deep breath. Believe me when I tell you that helping your kids learn to manage money is a skill parents are best equipped to do.

Here’s what parents can do when teaching children money management.

Use real money.

Today’s money is not only cash. Many transactions your kids see are don’t use cash at all. Using a system as described in The No-Cash Allowance helps kids learn the concepts of debit card spending, ATM transactions and electronic fund transfers. This is all very “grown-up” and exciting for kids.

Give real control.

When it comes to money, kids learn more by being in total control of whatever their resources are. No matter how good a parent’s intentions are, kids do not learn when parents make decisions for them. Can your child learn to read, ride a bike, or play basketball if you just show or tell them what to do. Can they learn if you never let them try for themselves?

Assign real responsibility.

A child’s first experience with spending is all about having fun. This is where parents can exert their influence and require the child to use part of his money for certain “child-expenses” like school supplies or some clothing. Kids can learn to adjust their spending to account for both fun and necessary expenses.

Allow mistakes to occur. Your child will not learn to read, ride a bicycle or play basketball without making mistakes. Likewise, your kids will not learn to make better money management decisions without making mistakes.

Remind yourself that kid-size money mistakes are the best learning experiences, are relatively harmless and don’t show up on a credit report. Mistakes made as a child are the foundation for the wisdom they will need as adults. Mistakes made later can create long-term financial problems for your adult children.

If you set up a regular, consistent allowance system as explained in The No-Cash Allowance your kids won’t need to ask for money. Why? Because your kids will always know how much, when and why they will receive money.

Kids know that in Monopoly®, they can only get $200 for passing Go. With that money they go forward and make decisions. When kids manage their own money, parents are more helpful when they step back and let the kids flex their decision-making muscles.

When the decision turns out to be wrong, you can gently ask them how they liked the results. Remind them that everyone makes mistakes with money. The key is to learn something from the experience.

When your kid asks for money start being proactive. Now is the time to help your children learn money management. Create an environment for them to learn by doing. What you do now will help them make better decisions later.

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