Financial Responsibility: Allowances

by Dr. Jim Taylor

Teaching children the value of money and financial responsibility is one of the most practical and important lessons children can learn. Americans, with their ravenous appetites for conspicuous -- and unaffordable -- consumption that is fueled by popular culture, have never been more fiscally irresponsible. Americans, on average, carry over $8,400 in credit-card debt, 20 percent of credit cards are maxed out, only 40 percent of people pay off their credit cards each month, and personal bankruptcy is at an all-time high.

How important is fiscal responsibility? Charles Dickens said it well, "Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Popular culture has connected what people have with how they feel about themselves and how they believe others will look at them. It has also caused people to confuse wants with needs. Today, many people believe they need cellular telephones, big-screen televisions, and expensive clothing, when these products are simply desires rather than necessities.

This connection between self-esteem and consumption has led to the epidemic of financial irresponsibility and ruin. Popular culture has also made spending money easier than ever. Almost anyone can get one or more credit cards these days and, as the statistics above indicate, many people don.t consider the ramifications of their spending until it.s too late.

Because of this out-of-control consumer culture in which our children are immersed, the earlier they learn about fiscal responsibility, the better off they will be. According to one survey, nearly half a million children in the U.S. receive a regular allowance.

Advocates of early financial 'literacy' recommend that young children begin to understand how money works and are old enough to have an allowance. Allowances show children about the reality of spending, saving, and budgeting.

The first thing you have to decide is whether your children should be given an allowance simply for being a part of the family or whether they have to fulfill specific duties. Some experts suggest that basic family responsibilities don't deserve an allowance, for example, making their beds or bringing dishes to the sink. This relationship also teaches them the value of being a contributing member of the family. Other household chores, such as mowing the lawn or, deserve an allowance. Because these chores go beyond daily household responsibilities, they provide children with an introduction to the notions of work and the exchange of goods and services for money. An important part of giving an allowance.and teaching the value of fiscal responsibility.is that your children learn that if they don't work, they don.t get paid, just like in the adult world.

Allowances can also be useful tools for teaching your children about other values. For example, requiring them to deposit a certain amount each month in a savings account teaches them about frugality and long-term planning.

• Having them set aside part of their allowance for their favorite charity teaches children about the value of compassion and giving.
• Helping them to decide whether to wait to buy something later rather than right away shows them about the value of patience and delayed gratification.

An essential part of becoming a responsible person is learning to delay gratification. Yet popular culture encourages.and profits from.people seeking immediate gratification. Fast-food, pre-shrunk jeans, and plug-and-play electronics all enable people to get what they want ASAP.at a price. Teaching children to delay gratification, through the use of allowances, will make them more resistant to the messages of "Gotta have it now!" with which popular culture bombards them, and will help them grow up to be financially responsible adults.