4-H/Youth Development: Use allowances to teach financial lessons
Source: Jennifer Hunter, Interim Assistant Director of Family and Consumer Sciences Extension
Most young people learn about money management by observing their parents’ saving and spending habits. Allowances are a great way for you to give your young person a hands-on lesson in money management.
You may already have an allowance system in place.If not, you can determine a reasonable weekly rate your young person can earn by helping out around the house, or you can assign monetary values to specific chores, such as a dollar for taking out the trash, two dollars for cleaning their room, etc.
Once you have established an allowance system, talk to your youth about ways they can spend it. You can encourage them to open a checking or savings account with the money they earn and set aside a specific amount to go into a bank account each pay period. Teach them how to make a deposit and to balance a checkbook or savings register.
Allow young people to control the money they earn. They can “blow it,” but if they do, resist the urge to give them more money when they want something else. This is a good opportunity to teach them about wants versus needs. As long as you are providing for their needs, they can save up for their wants.
Often as youth age, their wants grow in price. Teach your young person how to use their allowance, birthday money and other earned income to save toward a specific financial goal. Make sure they know how to set SMART financial goals. SMART is an acronym for specific, measurable, attainable, relevant and timed. By going through the process, youth learn how to state their goals, figure out how to achieve them, the amount of time it will take and why they want a specific item. Remember, young people often appreciate an item more if they have had to work for it, compared to one they were given.
More information on 4-H consumer and financial educational opportunities is available at the Woodford County Cooperative Extension Service.