Tips to teach kids how money works

Many parents want their kids to take on more responsibility around the house, but the question many parents are asking is, should I tie an allowance to chores? 

Steve Siebold, certified financial expert, self-made millionaire and author of the book “How Money Works,” says parents should definitely tie an allowance to chores. Here’s more from him:

You’re tying money to value and teaching children to think, “How can I create value in exchange for money?” It teaches kids to look for problems to be solved and to be entrepreneurial. They associate money with solving problems and not with entitlement. This is one of the greatest lessons you can teach your kids when it comes to money. 

Sit down with your kids and set a price on all chores that go beyond the basics like making their bed and cleaning their room. Keep the amounts small and do your research. For example, if a chore is mowing the lawn, find out what the going rate is in your neighborhood and don’t exceed it. 

You should have a combination of tasks that have to be done daily or weekly (taking out garbage or general yard work) to provide the basis for a weekly allowance, and extra chores that happen periodically, like cleaning the car, that kids get paid extra for. If they want money for a toy, you want them to look around the house and think, “How can I help? What can I do to solve a problem and earn money for the toy?” 

Parents must be consistent about enforcing that chores are completed. If your child’s base allowance is $10, but two chores aren’t done, the allowance should be less. If there is something going on that kids really want money for, tell them it’s an advance. Remember, money flows to great ideas like water; the secret is learning to turn on the faucet, and that’s why tying allowance to chores works so well. 

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