Newspaper article The Canadian Press

Lessons the Tooth Fairy Can't Teach: Allowances Can Help Kids Learn Financial Savvy

Newspaper article The Canadian Press

Lessons the Tooth Fairy Can't Teach: Allowances Can Help Kids Learn Financial Savvy

Article excerpt

Allowances can help kids learn financial savvy

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TORONTO - Robin Taub paid her two kids a weekly sum when they were younger in an effort to help teach them basic money skills.

Now, they're living away from home at university, managing a budget, and friends tease them for being money-smart kids, she says -- a riff on the title of her book, "A Parent's Guide to Raising Money-Smart Kids."

Giving children an allowance can help instill positive money habits, financial experts say. At a time when Canadians are carrying record loads of debt, that can be invaluable.

"Kids do need the opportunity to manage the money starting at a young age, where they can make little mistakes when the stakes are low and learn from them," says Taub, a chartered accountant.

She recommends doling out one dollar a week for every year of the child's age.

One of the biggest debates for parents around allowances is whether to tie them to chores.

Taub believes chores should be done because kids are contributing household members, not because of financial incentive.

But that's not reflective of reality, says Teresa Cascioli, author of the children's book series, "M is for Money."

"I don't think in the real world people get money just for doing nothing," she says.

Instead, parents can award kids for doing work beyond regular chores, like washing a vehicle, making the allowance a fluctuating sum based on a child's willingness to earn it.

Both women say five years of age is a good point to start granting allowances.

When kids are young, it's important to give them cash as it helps them distinguish the value of bills and coins, Taub says. Once they're older, parents can introduce kids to debit cards and online banking by opening up a children's bank account, which most of the major banks provide, usually without a monthly fee.

But handing them cash or transferring money into their savings account doesn't mean it's a spending free-for-all. …

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