Allowance

By Allison Berman
January 13, 2009

If you want to prepare your children for a lifetime of fiscal responsibility the best thing you can do is talk to them about money. Last week I suggested you discuss your personal spending and saving practices with your children. This week I am making a case for giving your child an allowance.

My husband and I both had great experiences having allowances and started talking about different ways to structure our kids' allowance before I was even pregnant.

Some questions to think about include when to start? How much to give? What's the money used for? Is the money earned (for doing chores) or is it just given? (I am kind of torn on that last one.)

Giving an allowance empowers kids to make good (and bad) financial decisions at a time in their lives when making mistakes means not having money to buy a comic book, as opposed to figuring out how to pay for their next meal.

Somewhere around 5 or 6 I started getting an allowance (that I hoarded in an envelope.) By the time I was 12 I learned if I saved my money (instead of buying the light pink frosted lip gloss that called out to me at "Dan's Beauty Shop") I could eventually afford to buy the stretch Farlow jeans that my parents deemed unnecessary.

My parents taught me to put some of my "allowance savings" directly into the bank - where there was "interest". I loved watching my money grow just by keeping it in the bank; and I felt personally accountable when I weighed the decision to buy something I desperately wanted or to continue saving for something else I might want even more down the road. And even after I had saved even more, I frequently decided to pass on "wants" receiving even more satisfaction watching my money grow. An added benefit, that sense of ownership eliminated a lot of the familiar, "but I want it" or "but all of my friends have it" struggles that so many parents encounter.

Today, I follow the same saving and spending principals. I don't deprive myself completely or splurge indiscriminately. I make responsible financial decisions. I only purchase things I can afford, but I don't buy something just because I can afford it.

I recently needed a long sleeves dress for temple and business meetings so I went shopping and I found one. I also found a sleeveless dress I absolutely did not need -but loved just the same. It was hard for me to do, but I bought the one I needed and left the one I wanted - making the same decision I made time and again when I had an allowance. As much as I loved the second dress, I know the money will better serve me earning interest in the bank, rather than hanging in my closet.

Next week: Talk to your kids about how the economy is affecting your life and theirs.

Allison Berman, an artist and mother of two, handpaints custom home accessories for interior designers and private customers. She works out of her home studio in Warwick, NY. See her collection at www.withlovealib.com. She can be reached at ali@withlovealib.com. Her column appears Tuesdays.