1. Give commissions, not allowances
Don’t give your kids the money just like that. Make them understand that they need to do certain age appropriate chores around the house, like – helping in the kitchen, cleaning the house, or mowing the grass etc. This concept is explained in the book, ‘Smart Money, Smart Kids’, by Dave and his daughter, Rachel Cruze. This concept makes the kids understand the value of money, and how difficult it is to earn it.
2. Stay clear of impulse buys
You are visiting a supermarket with your young one, and suddenly you hear her scream from the backseat of your car – ‘Mom, Can we buy that cute dress?’ – happens often? At this age kids make a lot of impulse buys, particularly when it is not their own money.
In such a situation, make your child understand that they can buy the dress, but they need to pay for it with the commissions that they earned by helping you in the household chores. And, suddenly you will find them saying that the dress doesn’t look that cute anymore, and there is no need to buy it. Also, ask your child to wait for at least a day before making a big purchase, as this will allow him to take the decision with a level head.
3. Make them help others
Once the kids start making some money, make them keep aside a small portion of their money for some charity. Allow them to donate this money in the church, or, let them help anyone they know off with this money. By being a giver, they will get a satisfaction, and this will help them in being a better human being.
4. Let them take the decisions
Teach them about the opportunity cost. Like, tell them that if they buy this play station, then they won’t have any money left to buy that school bag. This will prepare your kids to take decisions, and also face the outcome of these decisions, and will ensure that they buy the stuff according to the necessity.