Spending Guidelines

Before you start providing your child with a steady stream of income you should provide guidelines on how this money should be spent. Though you ultimately want to empower your child to make their spending decisions later on, it is extremely helpful for her to understand where the boundaries are. Do you want your 10 year old spending his entire $10 in allowance every week on bubble gum? Probably not. Not only would this be bad for his teeth, but it would also reduce the educational value of allowance. Below are a few ideas to get you started setting up a responsible spending program for your children.

• Make a list of items your child WANTS and a different list for items she NEEDS. Help your child understand the difference between needs and wants. A need is something she must have to live daily such as food and bus fare to school. A want is something extra in life that will bring her happiness.
• Introduce her to reasonable spending limits. You might allow up to 50% of her allowance to be spent on anything she wants. However, you can set limits on what she can spend it on. For example, she can spend up to 10% on candy and up to 20% on video games. You could specify that the other 50% of her allowance must be saved for specific goals, which she developed beforehand with your input.
• Ask your child to save the receipts for her purchases. Then once a week work with her to write down on a spreadsheet where she spent her money. This will come in quite handy in the budget making process.

Page 4 of 7: Cash Flow

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