By Lila Quintiliani, AFC®
Military Saves Assistant Coordinator

Do you hate to go shopping with your kids?  It seems like everywhere we go these days, there is STUFF to buy.  When I was a kid, the check out at the grocery store might have gum, alka seltzer and a magazine or two. 

Now there are toys, iTunes gift cards, candy, lip gloss, books – you name it, the racks at the register have it, and we always seemed to be trapped there forever behind a lady writing an out of state check and calling for a price check on everything.  My kids get a serious case of the “I wantas.”

I could just say “no” all the time, but for the past couple of years, I have been trying a different tack.  I am giving my daughters an allowance.  And while there are a few strings attached (they contribute 10% of their allowance to savings and 10% to charity each week), for the most part they are free to spend it as they wish.  Each week, I give them a dollar per year of age.  Friday is payday, and they eagerly watch as I track their savings in a spreadsheet.

When I’ve told others about this, I sometimes get the reaction that I am giving them too much money.  But I don’t think so.  Because, aside from Christmas and birthdays, my kids are responsible for purchasing ALL of their “extra stuff” including toys, video games, snacks and the girlie accessories they seem to find so necessary.   
In fact, many experts believe that allowances can be a good tool to teach kids how to manage their money.  But one thing to keep in mind is that it is a tool and not a complete solution.  If parents want to raise money-smart kids, they need to take the time to talk to their kids about money and good spending habits.  I often talk to my girls about wants versus needs.   When they were younger, I made sure they knew that the ATM was NOT a “magic money machine” that dispensed cash.

Here are some guidelines I follow when it comes to giving my kids an allowance:

•    While it is tempting, I don’t tie my kids’ allowance to chores.  They have chores they are expected to do, but they don’t get paid for them. I don’t want there to come a time when I ask for help unloading the dishwasher and get socked with a service charge.
•    I pay interest (okay, it’s only 1%, but that’s better than any savings account out there) so that they understand the concept.
•    I let them make mistakes, even though I inwardly cringe when they blow $10 on a plastic shoe filled with candy (yes, that really happened!) 
•    As they get older, I plan on giving them more money management responsibility, such as a set budget to buy their back to school clothing.

Is keeping up with the allowance and the various withdrawals and deposits a hassle?  Sometimes.  But it has also produced some very rewarding moments, such as when my then-six-year-old decided that she wanted to buy her older sister a Christmas present with her “own” money.  And on a recent trip to the store, my nine year old calculated sales tax on a pack of gum for her sister.   I also urge my kids to have a plan for their money, and they are both saving up so that they have spending money for our summer vacation.

Of course, there’s still the occasional misstep – my older daughter recently spent $14 ordering a hand held electronic organizer that I think is going to break within minutes – but I truly believe that over all, I am giving my kids the right skills so that they will eventually become responsible, money-smart adults.

Some resources: nonprofit National  Endowment for Financial Education has a resource library for parents to learn how to instill smart money habits in kids) For older kids – have them take a “reality check” from the nonprofit Jumpstart Coalition) site with resources for parents and games for kids.  There’s even a new free Avengers comic that teaches mad money skillz)


Image from Flickr Creative Commons

Tip of the Day

  • Written by Guest Blogger | September 30, 2014

    The Thrift Savings Plan (TSP) offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans. Sign up or get more info at

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