A kid’s allowance can be effective training for later life

We hear over and over that ‘money is the root of all evil,’ or that ‘money can’t buy happiness.’ Yet, at the same time, money is a major part of our lives. Couples fight over money—in fact, I have read (and observed) that money is one of the top reasons that married people divorce. Money is, after all, a statement about your priorities. Your spending decisions make your personal, subconscious and even secret desires concrete and real. You can’t hide when you’re spending money. How much you spend, what you buy, and whether you succeed or fail at living within your means reveals a lot about your character, personality and deepest inner values.

Years ago, I had a paper route. I was probably one of the last of the old-style paper carriers. Today many of us have our papers delivered by professional delivery services. I’m not knocking this development, but it’s a shame that none (or a tragic few) of today’s young people have the experience I did as a paper carrier. At the age of 12, I was responsible for counting and managing money, and collecting fees for papers from just about everyone in the neighborhood. I was required to figure out my portion and turn the rest over to the newspaper company. This led me to understand something that a young person can never grasp from just hearing it preached: Money does not, in fact, grow on trees!

Constant commercial bombardment from TV, the Internet, radio and everywhere else makes it a safe bet that today’s young people have a greater desire for money, or, more precisely, the things that money can buy. This is, in my view, neither a strength nor a flaw. It is, nevertheless, a reflection of the fact that in the Western (especially American) world there’s simply more wealth and prosperity than ever before. Given all this, doesn’t it make sense to teach children how to handle money at the earliest age possible?

Even before the paper route, I had an allowance. ‘Allowance’ seems like an old-fashioned word, and I wonder how many children receive allowances. I have the impression that a lot of parents resentfully give their kids money on demand, and then wonder why they don’t better appreciate it. To which I reply: How in the world is somebody supposed to appreciate something when it’s handed to them on demand and unconditionally? None of us—parents or otherwise—have any business criticizing kids for problems that we enable.

An allowance, though quite literally a handout, is a reflection of the fact that the child cannot yet earn money in the adult world. There’s nothing wrong with this, but the way a parent goes about it is important. The word ‘allowance’ implies a limit; it communicates to the child that ‘I’m giving you money, but only so much. You have to figure out how to spend it wisely.’ This is superior to the usual cycle of doling out money on demand, and then resenting your child for not appreciating it. (And, worst case, wondering why he moves back into the house at age 25 and refuses to pay bills, work or leave!)

An article on MSNBC.com surveyed various experts who suggested that before parents mindlessly hand money over to children, they should first talk with them about it. ‘If many adults find it easy to spend most of the money they get, imagine how challenging money management could be for a kid. Before launching into any kind of an allowance system, talk with children about saving, investing and donating—as well as spending. Help them understand that money gives them the power to set goals and make important choices.’

I couldn’t agree more! If you want your kids to appreciate that money doesn’t grow on trees, you’re going to have to show them how difficult it is to hold onto—and let them experience the frustration and disappointment when it runs out. Take it from a psychologist: You’re not harming your child’s self-esteem by letting him experience these emotions. In fact, you’re helping him to better cope in the real world of his future—where you might not be around to bail him out.

Other points to consider: You can encourage your child to spend her allowance on things you would normally buy, such as special treats, clothes or school supplies. Yes, you pay for these items either way, but letting the child experience being a consumer is excellent practice for adulthood. Experts also advise (and I generally agree) that allowances should not be tied to behavior, and shouldn’t be withdrawn as punishment. Don’t tie the allowance to chores either. If the chore is something you feel the child is obligated to do regardless of allowance (such as make the bed, not leave food in the bedroom, etc.), then don’t get into ‘bribery’ for these obligations. At the same time, if the child offers to do extra jobs—such as wash the car or mow the lawn—then you can work out arrangements for bonuses. Not all that different from the real world, right?

Though the primary subject here is money and allowances, what’s really at the root of all this is: Thinking. Children have to grow up into thinking adults. Otherwise, they will never develop true self-esteem and the sense of responsibility and happiness that comes with it. The need for money, and the obvious potential for shortage, requires us all to be good thinkers. And it’s never too early to learn how to think.