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Teaching children fiscal prudence

I did not get an allowance as a child- my basic needs were taken care of and the concept of ‘extras’ did not exist. However, though we take care of more than the basic needs of our children, most of them also get allowances for ‘extras’. Allowances can be a valuable tool to teach children about budgeting. They can learn to allocate their allowance towards  spending, saving and giving away. When the kids are older, their allowance can become a “working allowance”. They can be paid an allowance for working around the house;  you not only ease the load on yourself, but also teach them that money does not ‘grow on trees’. Unfortunately, those of us who live in India and the Far East, have household help and never ask our kids to work around the house. This is a pity, really, because our kids scoff at being asked to do anything around the house. Teaching children the value of work (even house work) will prepare them for life as future hard-working employees. In the West, household help is scarce and parents can easily implement the concept of a “working allowance”- they can decide on a reasonable amount of money to give for each household chore.

Heidi Emberling, a Parent Educator in Palo Alto, California, has a special technique for teaching her children the value of money. “If my son gets himself ready for school in the morning (he’s in kindergarten) by doing four things–going potty, getting dressed, brushing his teeth, and brushing his hair without any fussing, he gets a sticker on his calendar. At the end of the week, each sticker is worth $1. He has three jars in his room–one save, one give, and one spend. He divides the money as he likes, but at least one dollar goes in each jar. He can immediately spend the money in the spend jar, or he can combine it with the save jar for something he really wants that costs a lot. He knows that the ‘give’ money is for people (or animals, or some other cause) who don’t have money of their own.” By allowing her son to decide where the money goes, this mother has empowered him to make his own financial decisions, even at a very young age.

As our children get older, we can teach them about saving for long-term goals. We can introduce them to banking and simple banking products; let them open a savings account, teach them how to keep track of how much they have.


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Renuka Vaidyanathan, an erstwhile finance professional, opted out of the corporate rat race and now likes to think that she wears many interesting hats. She is an events’ organiser in the cultural space and also writes every now and then about people, places and events. She is an avid advocate of 'green living' and dabbles in some sitar-playing as well, albeit as an amateur.

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One thought on “Teaching children fiscal prudence

  1. Kritika Srinivasan

    Excellent article Renuka. When analysed this way, it seems easy doesn’t it? To save, spend or give away. I would do well to organise my finances in this manner as well! Thanks for this.


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