She is 7 years old and she sees a printed paycheck stub that includes taxes, groceries, food, and rent. She starts with 42 dollars every two weeks and my husband then breaks is down to 7 dollars a week for her. She is able to see that her paycheck doesn’t just come without taking money out and she needs to work for her allowance. It is an invaluable lesson for a 7 year old. Thanks for the updates.

But if it’s about the lesson, and not about needing the money to make ends meet (along the lines of the response from Carl below), here’s something I’ve
tried with teens:

Have them be in charge of grocery shopping for a month. You give them the money, a very strict amount, with a list of items they have to buy. All the junk food they are attached to they only get to purchase if they can buy everything on the list first. Of course you make that really hard. Let them go to a couple of stores and comparison shop.

They’ll learn a lot. I notice you can teach teens a lot with making them work for two things in particular: junk food and TV

I’m a college professor and a family finance journalist, and if you need more planning and lessons for the kids in this craazy, stressful economy, visit my blog, AskAnne. I’ve just posted a 3-month plan, in case someone at home has been laid off, a 1-year plan, and a plan for single parents, all with lessons for the kids. The plans are designed for reducing costs and finding new income during the recession, even if you manage to keep your jobs.

–Anne

You make some very good points! Thanks!

There are many ways to teach your child the cost of living. For example, I was acutely aware growing up of the cost of food by helping my mother with grocery shopping. There was a budget, and I went through the weekly circulars with her and took pride in squeezing every penny we could. I also developed a basic knowledge of how much, say, bananas should cost per pound, when I went off to school, which was extremely useful. There’s no reason you can’t do this with other expenses too, like utilities bills. Young kids love to feel like they are helping. You could make it a challenge for your child to help reduce your energy consumption or grocery bill. Older kids have a lot of extra costs that aren’t necessities, like after school sports or school trips that they can help pay for which will teach them that dollars can only go so far and they may need to pick and choose between their wants. Which do you think will be the positive lesson? “I’m taking $25 dollars from your money to pay for your soccer” or “I’m taking $25 to pay for the water bill”. Even if you are skimming money to put into a savings account or a CD for their college education, they will still understand that the money is still theirs.

Taking away a portion of their income to pay for general family expenses as an instructional tool seems logical to an adult, but it hasn’t been that long since I was a kid, and I know that if it had been me, I would have seen it as unfair, and even punitive. Childen don’t see things the way adults do, and you need to take that into consideration. You’re not doing your child any good if they don’t understand the lesson the way you intended.

We all knew when we had our children that there would be expenses associated. They aren’t renters who signed a contract with you for food and board. They are dependent on you for the necessities of life by your choosing, not theirs. If there are sacrifices to be made in order to support the family you planned, they are yours to make, not theirs. They already have little control over their own lives. Taking a significant portion from the income that under their control to teach them a general lesson that “life is expensive, get used to it” doesn’t give them any specific tools to use to handle money. It’s like giving your child some tools and telling them to build a birdhouse, then coming back and taking away their hammer because you need to use it.

There are two ways to teach a lesson, you can punish mistakes or you can reward successes. We use a mixture of the two as parents, but rewarding success is scientifically proven to be the strategy that results in more consistent desirable behavior. If your child feels punished or as if they are being treated unfairly, they will not learn the lesson.

I completely disagree, however, with the last post. How is it that in today’s society we come to think of life as being “hard enough as it is” in this day and age of extreme instant-gratification. I’m actually shocked to see such spoiled kids everywhere – not only are their basic needs met at home (food, shelter, clothing), but their every “wants and desires”, as well. They now have cell phones, iPod’s, Nintendo DS, Starbucks in hand, you-name-it-they’ve-got-it.

I’m sorry, but I see much of our society raising spoiled children who think only of their wants and needs, and not those of others. The days of saving up for that special gift for “mom, dad, grandma, etc” are quickly becoming a thing of the past, IMO. Based on what I’ve seen and experienced with my 5 children so far, I think this will be a positive, eye-opening & enlightening experience for them. My oldest is 14 yrs old. He earns a “commission/allowance” for the chores that are expected of him. At this time we have taught him that 10% goes to tithe & 10% goes into savings. When he is of age to hold a real paying job, I think we will sit down and discuss this idea with him. For starters, we will look at the groceries that he consumes mainly himself. Perhaps we will let him be in charge of buying his “favorites” with his money, and at the same time teach and encourage him to use coupons, which he is actually starting to catch on to just by watching me, LOL!

Great discussion, gives us something important to think about, especially in today’s economy!

I just feel like kids today don’t really enjoy as carefree a childhood as I did, or my parents for that matter. I’m told it’s an erosion of innocence over the generations. Kids just get “older” faster. I would not wish to add money as a worry for my children, growing up is hard enough.

Also, would it not be fair to give a child who is contributing more say in the family. For instance, if they’re giving money for the food fund, wouldn’t it be correct to let them chose what they eat? No, this is a bad idea. Kids aren’t ready for these choices and this responsibility.

Does your approach teach children that it is OK not to provide for their own children later in life?

By the way, here’s a scenario where your idea could backfire – what if the child decides not to earn any extra income at all. Then he has nothing to contribute, but you still provide. Is that teaching a sense of entitlement?