Kids and allowances. It’s one of those hot-button parenting topics on which everyone is guaranteed to have an opinion, and they’re all going to be different. We’re not here to weigh in on whether or not you should give your kids an allowance. That’s a decision for every family to make based on their unique financial circumstances. But if your kids receive allowances, here are some ideas you can use to help teach good financial habits. 
Discuss Spending vs. Saving
One of the best things allowances do is help kids learn the importance of saving money. At first, they will likely be tempted to spend their allowance as quickly as they get it, and it’s OK to let that happen, but only a few times. Having the experience of here today/gone tomorrow is a good way to start the discussion about saving money. Ask questions like, “How did you feel when you got your allowance?” “How do you feel now that it’s all gone?” “Do you think it would feel better if you still had some money left?” Encourage kids to save a portion of every allowance. Set savings goals and celebrate when they reach those milestones.
Establish Expectations
Since your kids’ basic needs are already covered by you, they will be spending their allowance on things they want. Decide together what they are going to be responsible for using their allowance to pay for. With younger kids, it might be candy, treats or small toys. With older kids, it could be movie tickets, special snacks or video games. The important thing is that once you establish those parameters, you stick to them. If you’re at the store and your child wants something they’re supposed to pay for, but they’re out of money, they need to wait until they can buy it with the money they save. It’s not fun, but it will help reinforce the message that saving money is important.
Explore Wants vs. Needs
Yes. Your middle schooler needs shoes. But they want the latest $200 sneaker release. As kids get older and their wants grow more sophisticated (and expensive) they should use their allowance to help pay for those extravagances, should you choose to allow them. Make a deal for the amount you’ll pay and the additional amount that is their responsibility. To make it extra official, draw up a simple “contract” with the terms of the deal and have your child sign it. If they don’t meet their end of the bargain, they will have to accept whatever lower-priced option you choose.
Encourage Generosity
Giving an allowance is an opportunity to talk with your kids about being charitable and supporting causes that are important to them. Find out what causes they are aware of and feel strongly about. You might be surprised to find that your son or daughter is a major animal advocate or that they worry about the homeless people they see on your drives around town. Whatever it is that moves them, help them support it with a charitable donation. You can make it even more meaningful by matching their donation, and showing them you care, too.
Lead by Example
When it comes to spending and saving habits, your kids are going to follow your lead. If you preach about the importance of saving money, but they see you regularly using credit cards to pay for extravagant purchases, you are sending mixed messages. Don’t make money an emotionally charged, taboo topic. Let them hear you having conversations about the family finances and see you making sound financial decisions.
