Molding Responsible Spenders

Giving children an allowance is a good way to teach them responsible spending habits that they can carry into adulthood. Experts say it’s best to begin early.

“Early exposure to money management plays an enormous part in children being responsible with money when they become adults,” says Irvine investment adviser Victoria Collins.

Collins and other experts recommend using an allowance to teach good spending habits if you keep the following in mind:

* Consider your child’s age and life circumstances before setting an allowance amount. With younger children, it’s easier to set a basic expenditure amount, because their needs tend to be limited. Older children usually have more expenses, especially in the areas of clothing, music, hair products and cosmetics.

* Give the handout, then hands-off. If your child decides to blow the weekly allowance on bubble gum, don’t say anything. He or she will eventually suffer the consequences and learn from such experiences.

* Encourage saving. To encourage your child to save, you may want to require that he or she hold onto a certain percentage of the allowance every week.

* Teach delayed gratification and planning. When a child wants something of value, point out that he or she can save for a certain number of weeks to buy the item.

* Use a chart. If you’ll be paying your children for chores, teach the value of work by creating a chart that shows how much each chore is worth. The chart can be filled in with stickers and amounts when a child completes a chore.

* Give lessons about household expenses. Go a step beyond the allowance by having your child (11 or older) sit with you when you pay bills. You may even let the child fill out checks. This gives children a more realistic view of money and shows that it is finite.

* Watch your money attitude. How you react to money will affect your child profoundly. If you’re angry every time you sit down to pay the bills, this will teach your child that money management is not a happy activity. Constantly using credit cards and running to the ATM also gives a negative impression.

* Choose the piggy bank carefully. Get a clear piggy bank that allows your child to see the money accumulating. This will show how money adds up when you give it time.