Kid$ and Money

Melissa Kossler Dutton
Caitlyn and Evan Menges of Dublin divide their money into these "Save," "Spend" and "Give" jars.

When Sarah Adams loads or unloads the dishwasher and cleans her bathroom and bedroom, she earns money from her parents.

If the 11-year-old doesn't do the tasks, she doesn't earn the cash. She's learning how things work in the real world, said her mother, Claire Adams. She and her husband, Dan, don't want Sarah to grow up with a sense of entitlement.

"We want her to understand you have to work for your money," Claire Adams said. "It's not going to be just given to you."

It's a good approach to teaching financial responsibility, said Dr. Dan Coury, chief of developmental and behavioral pediatrics at Nationwide Children's Hospital. "Having kids earn an allowance is a good thing," he said. "It helps them learn responsibility and develop an understanding of what parents have to do to earn money. It prepares them for life."

Coury generally recommends that the chores for which children get paid go beyond routine tasks all family members do to keep the house clean and organized. "It's a mix," he said. "I'm not paying for these things that I expect to be done, like keeping your room clean and making the bed, but there are other things that are helpful to me and that you will need to learn to manage when you move out."

Jamie Menges and his wife, Terri, give their 7-year-old son, Evan, an allowance that is not directly tied to chores. Their 4-year-old daughter, Caitlyn, does not yet get an allowance.

"I believe it fosters accountability," said Menges, a Certified Financial Planner at PDS Planning in Columbus. "Whether it is your chores at home as a child, or the thankless tasks we all must perform in our jobs, or it's being there for a loved one without thanks, it enforces to the child that sometimes you have to be accountable to others. In this case, our household (family) has a responsibility to maintain the place, and you have a role in that."

Menges said it's critical that parents teach kids how to manage the money they receive. "The financial literacy programs in our schools are insufficient to teach children to make decisions about money," he said.

Parents need to provide a firm foundation about handling finances so children avoid debt and difficulties later, Menges said. Kids-like adults-have three choices about what to do with their money. "You can spend it, save it or give it" to charity or another good cause, he said.

Parents really need to emphasize the value of saving money, he said. He suggests creating jars for saving, spending and donating to a cause the child supports. It provides a great visual to help them understand what they're doing with their money. Once the "save" jar has accumulated enough money, Menges recommends taking the child to the bank to open a savings account.

It's important to share bank statements so kids can see how the account earns interest, he said. Keeping them aware of the balance is a tangible way to understand the value of saving.

It's also a good idea to encourage children to save money for a special purchase, Menges said. The exercise helps them see how setting aside a little at a time can add up. If a child wants to buy something special, that's a time when parents may want to pay for additional work around the house, he said.

Parents can foster saving by keeping allowances low, Coury said. An allowance should not be so substantial that children can go out and buy whatever they want. "Make it an amount that encourages saving," he said.

Coury also sees value in allowing a motivated child to do extra chores for extra money. "As adults we may work a second job or extra hours in order to earn extra money," he said.

Though some financial experts and educators advise against it, some families may find that paying for good grades provides an opportunity. Coury suggests this as an option for students who need an extra nudge to succeed in school. "Some children are not particularly competitive," he said. "Paying for good grades is a way of motivating children and demonstrating that you value your child getting a good education."