Survey: Talking to Kids about Money, Giving them an Allowance Helps Financial Literacy
A recent survey conducted by a financial company suggests that having conversations with kids about money and giving them an allowance helps children become financially responsible.
T. Row Price's 2015 Parents, Kids & Money Survey found that parents who combine conversations with experimental learning are likely to have financially smart kids.
"We were surprised to see the extent to which letting kids experience money may have an impact," Judith Ward, a T. Rowe Price senior financial planner, said in a statement. "While giving kids an allowance is one way to let them experience money, parents can also consider opening up a savings account for them or letting them use a debit or credit card, with some guardrails of course."
For kids that enjoy online games, the company launched Star Banks Adventure to help children expand their financial literacy.
Money has traditionally been a taboo topic among friends and family members, but they survey found that parents who have frequent discussions with their kids about financial topics are more likely to have kids who say they are knowledgeable about managing personal finances. Kids who get an allowance from their parents are more likely to say they are knowledgeable about managing personal finances. The same can be said for parents who avoid swooping in to save their child from financial mistakes.
The survey included 1,000 parents and 881 children between eight and 14 years old. A full breakdown of the results can be found here.
If your child is reaching the age that an allowance might be appropriate, PBS Kids and the American Academy of Pediatrics recommend setting clear guidelines and sticking to them. Parents need to determine the amount that's reasonable and what it can be used for. If it's fun money, consider any restrictions that might be appropriate. Parents can choose to tie the allowance to chores or not, but if it is, parents need to be clear as what they expect from their kids before they're paid.
More tips can be found here.