Teaching Children Financial Responsibility

There comes a time in every child’s life when financial responsibility has to be learned. As parents, we do this through the allowance. As long as your children live at home, it is never too late to begin the lessons of financial responsibility although starting around the age of five or six provides maximum opportunity for learning.

Allowance teaches money management. Kids who have to struggle with money become more responsible in areas of finances but also in other areas of life.

There are several helpful “Allowance Plays” in the Parent’s Playbook.

Children do not have to “earn” their allowance. The allowance is not given for doing chores. If the child is paid for his or her own chores then the lesson of belonging and contributing to the family is voided. Instead, allowance is given automatically but the opportunity to make more money is always available for doing someone else’s chores (a sibling or one of the parent’s).

Give the allowance at the same time every week. This is equivalent to the weekly paycheck. Make sure that you pay the child with an envelope and an invoice that breaks down the funds (for example, $5 for being 5 years old, and $10 for lunch money). Sign the invoice with “because you are loved, spend it wisely and plan ahead.”

Never tell the child what he can or can’t do with the money. Children cannot learn to manage money if their parents tell them what to do with it. Kids only learn to manage money when they face financial hardship. As long as they do not spend the money on something illegal, let them decide how and when to use it.

Be prepared for guilt, anger and “it’s not fair”. When your child realizes that they have blown their money they will be coming back for more. Here is the “Play” for handling this situation. Remember that the lesson is financial responsibility. Anger for a lack of responsibility destroys self esteem. Rescuing a child who has made a poor decision about money will rob them of a lesson in the value of a dollar and keep them financially dependent on you for life.

Child: Mom, I need some money for the dance.

Mom: Go to your envelope and get some.

Child: I spent it all on that new pair of shoes.

Mom: Bummer, what are you going to do to earn more? I’ll bet you could find someone else’s chores to do for a day or two.

Child: Can’t you just give me next week’s allowance early?

Mom: I wish the world worked that way. Payday comes once a week (or two times a month). My boss doesn’t give me my paycheck early just because I spend it all before payday.

Child: but that’s not fair

Mom: I know, I feel that way too but payday is on Saturday

Child: my friend’s parents love them and would give them more

Mom: that may be true but payday is on Saturday. Do your best to solve this situation. You’ll get another chance to manage your money better on Saturday.

Your child will not be happy so the best strategy is to get busy doing something else. So, give them one last supportive line such as “you are very resourceful. I am sure you’ll figure something out. See you later”.

Bringing it Home

To implement this Play in your home, here is what you will need:

Box of Envelopes (one year’s worth of paychecks)

Invoices (make copies of the sample below)

Three or Four Weeks of Cash (always have extra)

Practice, practice, practice (It is easier to implement these techniques when you practice the dialogue with someone other than your child. Enlist the help of your partner, friend, or co-worker to practice the dialogue before you try it on your child.)

Date _______________________

Invoice for ____________

Total Dollar Amount $__________

$____ for being _____years old

$____ for ___________

Because you are loved! Plan ahead and spend it wisely.

Signed: [parent]


Angie Milhous is a nationally renowned speaker in the field of stress management and humor. For more information, visit her website.