Many children first learn the value of money by receiving an allowance (pocket money). The purpose
is to let children learn from experiences at an age when financial mistakes are not very costly.
The amount of money that parents give to their children to spend as they wish differs from family to
family. Timing is another consideration, Some children get a weekly allowance. Others get a monthly
allowance.
In any case, parents should make clear what, if anything, the child is expected to pay for with the
money. At first, young children may spend all of their allowance soon after they receive it. If they do this,
they will learn the hard way that spending must be done within a budget (预算). Parents are usually advised
not to offer more money until the next allowance.
The object is to show young people that a budget demands a choice between spending and saving.
Older children may be responsible enough to save money for larger costs, like clothing or electronics.
Many people who have written on the subject of allowances say it is not a good idea to pay your child for
work around the home. These jobs are a normal part of family life.
Paying children to do extra work around the house, however, can be useful. It can even provide an
understanding of how a business works.
Allowances give children a chance to experience the three things they can do with money. They can
share it in the form of gifts or giving to a good cause. They can spend it by buying things they want. Or
they can save it.
Saving helps children understand that costly goals require sacrifice. You have to cut costs and plan for
the future. Requiring children to save part of their allowances can also open the door to future saving and
investing. Many banks offer services to help children and teenagers learn about personal finance.
A saving account is an excellent way to learn about the power of compound interest.
Compounding works by paying interest. So, for example, one dollar invested at two percent interest
for two years will earn two cents in the first year. The second year, the money will earn two percent of
one dollar and two cents, and so on. That may not seem like a lot, but over time it adds up.