Tag Archives: allowance strategy

Where can kids learn money management skills?

A mom helps her daughter add her allowance to her account.

Teaching children financial literacy is important, yet it is not the complete solution. Children need to learn money management skills as well. What’s the difference between literacy and competency?

Literacy is knowledge. Yet, knowing about financial matters will not help children manage money. Simply knowing about saving, borrowing, insurance, compound interest, investing, is only one aspect.

Competency is skill. Competency with requires practice making decisions and learning from mistakes. Consequently, learning to money management skills requires hands-on practice using real money.

This hands-on practice does not happen in the classroom, because schools can’t provide real money. Schools can offer simulations, exercises, games and discussions, but not real money.

As a result, parents are the only ones who can provide the one tool required for learning financial skill, namely money. Parents can help their children gain money management skills by giving them hands-on practice at home with their own money.

Reinforce financial knowledge at home

Financial knowledge can be learned at school. Then it can be reviewed at home. Family discussions about financial topics helps kids become comfortable with money management.

Money topics to talk about as a family include:

  • Using different types of money such as cash, checks, credit, debit,
  • Accessing money from financial institutions using checks, ATM and electronic fund transfers (ETF).
  • Knowing basic financial terms including credit, debit, overdraft, interest, deposit, and withdrawal.
  • Financial documents: checking account, savings account, loans, credit card statements, bank statements, tax returns and other financial documents you use in your family.

Develop money management skills at home

A child can have many years of financial hands-on experience with parental guidance at home. When a child is responsible managing his or her own money the following skills take on greater importance.

  • Addition and subtraction. Managing money is all about numbers.
  • Record keeping. Knowing how much is available and when money is needed requires keeping track of money flow.
  • Decision making. Deciding how to use money is an exercise in making choices.

As a result, children who learn to manage money will be more confident and capable to manage finances as adults.

Furthermore, parents who raise financially competent kids will not need to bailout their adult children. Hence, parents can protect their own savings and retirement funds.

Managing money is a combination of knowledge and practice. One without the other is ineffective. The ability to control one’s money provides the power to make choices.

In conclusion, when we help our children develop financial competency through hands-on practice, they will be better prepared to navigate economic challenges as adults.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. Buy The No-Cash Allowance today and follow Lynne’s common sense approach for teaching children that money is a number. 

 

 

 

Parents: Give your kids a money makeover with the allowance strategy in this book

Mom using new allowance strategy with daughter
The No-Cash Allowance: A mom uses new allowance strategy with daughter to add a deposit to account log.

A magical thing happened on the way to the piggy bank.  As a result of being a check-and-credit-card mom I never had cash to pay my kids their weekly allowance. Clearly I needed a new allowance strategy.

I realized that because I managed without cash, they would learn to do the same. Consequently,  I stopped giving my kids allowance as cash.

With my new allowance strategy, I started paying allowances as a number. Problem solved.

Because numbers never lie it was always clear who got paid and when. There was no more dumping out of piggy banks to count the money because the numbers told it all.

This no-cash payment plan became the basis for The No-Cash Allowance, a guide for parents to teach their children money management. Kids learn to manage cash and cashless transactions for both fun and necessary spending.

A no-cash allowance is a system in which a child controls all funds received from parents through a written account initially kept in the home. Adults act as bankers and the child as account owner.

A no-cash allowance strategy in practice

One daughter opens her account, adds her weekly amount and records the new balance. She announces that she has enough to buy a new sweater. Her sister updates her own account and asks to stop at the bookstore. We shop. I pay using my credit card. When we get home they subtract their shopping expenses and update the balances in their accounts.

Throughout this experience no cash exchanged hands yet everyone knows exactly what happened. Money is deposited, balances grow, purchases are made and consequently, balances shrink. The kids proudly took responsibility for their own spending decisions and accepted the resulting change in their account balance.

The most difficult part for parents is giving up control and letting the kids make the decisions. Remember that scary feeling when you knew you had to let go of your child’s bicycle. You expected some bumps and bruises. The same thing happens with kids learning to control their own money.

Kids like the challenge of being in charge of their money; they like making decisions. Our mantra was, “It’s your money. You decide.”

We had to bite our tongues to avoid telling them about a spending mistake we could see coming. Yet, we knew that a $10 mistake by a kid would be a gentle lesson compared to a maxed out credit card as a young adult.

No-cash allowance strategy explained in book

Because I believed in The No-Cash Allowance after seeing the result with my own children, I invested my own money to write and publish the book to share with parents like you. The book is about kids and allowances, but more importantly it is about kids learning to make and understand their own decisions using money as the learning tool.

When my book finally rolled off the press our children had flown the nest. Yet, we knew that our allowance strategy succeeded because they never once called from college to ask for money and never moved back. Our children now have children of their own, who are learning to manage their money the no-cash allowance way.

As a mom, I set out to teach my kids about money. What they learned reached far beyond dollars and cents. My children learned essential life skills like confidence, decision-making and responsibility.

I believe your family can be as successful as we were.

The bottom line is that this allowance strategy shapes behavior through positive reinforcement by empowering children to make real decisions.

In the end, this mom learned that it wasn’t about the money at all.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. Buy The No-Cash Allowance today and follow her common sense approach for teaching children that money is a number.