Why is allowance important for kids today?

Money makes the world go round and is an integral part of our lives. Teaching our children about money is as important as teaching them to cross the street safely. If they’re not paying attention or slip-up and make a wrong move, there could be serious consequences. But, if they pace themselves, familiarize themselves with their environment and know their own limitations, they’ll be able to navigate any path throughout their lives. As parents, it is our responsibility to teach our children about earning money, saving money, spending responsibly and using money to help others less fortunate.

We’ve taught our kids about money, using their weekly allowance. They each have a bank with separate compartments marked ‘SPEND;’ ‘SAVE;’ and ‘SHARE.’ The kids use their money from the ‘SPEND’ compartment as their weekly entertainment fund. The ‘SAVE’ money is used to purchase big-ticket items. And the ‘SHARE’ money is for helping others, like the little girl in Haiti that my son’s class supported.

A few summers ago, my son and daughter announced that they’d like to jointly purchase a new surfboard. The surfboard was on sale, but they didn’t have enough money to buy it. My husband and I decided to make them a ‘loan,’ and teach them lessons about borrowing money. We committed our ‘loan agreement’ to writing, presenting the kids with ‘scheduled payments’ that they’d make to the ‘bank.’ They bought their surfboard and began making  ‘payments to the bank.’ The kids learned to discipline themselves, paying back the ‘bank,’ before they spent money on other things. (What the kids still don’t know, is that we deposited the ‘loan payments’ that they made to ‘the bank’ into their own personal savings accounts! But that surfboard would have never meant as much to them if they didn’t buy it ‘themselves!’)

Recently, my son found an electric guitar that he wanted. He didn’t have enough money to buy the guitar, but he knew what he had to do if he was to purchase the $1100 guitar that would later rattle my windows! He realized he’d have to curtail his spending, plus earn more money than his weekly allowance provided.

His dad and I were thrilled to see him apply the lessons he’d already learned, as he diligently worked alongside his dad’s other employees for weeks last summer. Although he came home exhausted each night after work, he was proud to bring home his paycheck! When he went to the music store to make his purchase, he, too, was proud of himself. And his guitar means the world to him because he bought it himself!

In a few, short years, when our kids leave home, I know they’ll be okay because they’d have had a taste of adult-like responsibility. They’ll be ready to face the real world, whether crossing the street alone or managing their own finances!

Bio: Mary E. Davis is the author of THE ENTREPRENEURIAL MOM: Managing for Success in Your Home and Your Business. With over sixteen years experience as an entrepreneur and a mother, Mary has written this book to guide and teach women the life-balance skills necessary to become successful in both entrepreneurship and motherhood, in today's fast-paced world. A Florida native, Mary currently lives in Cocoa, Florida with her husband of over 20 years and their two teenaged children.