Accounting News

Wednesday, September 19, 2012
Financial Literacy

Every parent would like to teach their children financial literacy. One way that has historically been done is with an allowance. The American Institute of CPAs hired Harris Interactive to survey parents about what parents across the country do with their kids when it comes to allowances. If you remember what your parents gave you as a child then prepare to be surprised.

61 percent of parents pay allowances to their children. The time this starts for most people is at age eight. That isn't the surprising part. What shocked me is that the average amount is $65 per month. That comes to $780 per year. And the more likely the parents are to pay for child's' activities the more likely they are to get an allowance also.

For a vast majority of  parents, 89 percent, the allowance is tied to some chores. The average child is expected to do 6.2 hours per week around the home. Many school age children are also paid for good grades. 48% of parents pay for good grades and they average value of an A in these families is $16.60. Pretty good money when grades come out multiple times a year.

So what are the good ways to teach kids about financial literacy? Who better to ask than an accountant who advises people about spending everyday. Here are tips from the National CPA Financial Literacy Commission.

Talk.Keep the lines of communication open. Talk about saving and wise way to spend and what expenses can be eliminated.

Teach Saving. Create short and long term savings goals. Maybe it is a trip for ice cream after a few weeks of saving or a video game after several months. There is nothing more important than learning delayed gratification for managing personal finances.

Be Consistent. Pay your kids on a regular schedule. If it is tied to chores make sure the kids know what is expected of them and when. Don't pay out if the work isn't done. The reward should be tied to the work. You can always half pay for half work.

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