Dear Reader, To me, teaching kids how to make good money choices is one of the most important things a parent can do. And whether you realize it or not, kids learn from your example. A 2011 Schwab Parents, Kids and Money survey showed that kids rate their parents as a key resource for teaching them about money, spending and investing -- and they're eager to learn. So while your daughter may be used to asking you for money, she might actually be quite ready to take on some more financial responsibility.
Learning about money is a hands-on experience. To really understand how to make good choices, kids have to have some money of their own. I'm a big proponent of giving kids a sense of financial control early on. An allowance is usually the first step. So if you haven't yet established a regular allowance for your daughter, now's definitely the time. If she's already getting an allowance, you might want to evaluate whether it's enough -- and then insist she use it to cover certain things, including some of the "extras." You may be surprised how quickly she learns to manage her own spending.
For example, a friend of mine increased her son's allowance so he could pay for lunches at school himself. It wasn't long before he was packing his own lunch and saving that extra money for other things he wanted!
Create a budget together
First sit down together and list the things you expect your daughter's allowance to cover -- lunches, movies, video games, maybe certain clothes. This would be the perfect time to suggest that savings also be listed as a budget item. Now add up her current allowance for the month plus any extra money she might get from gifts or a job. Have her do the math. Is she coming up short? If it's time for a raise, decide together on a reasonable amount that will cover her expenses -- and make sure she understands that it's up to her to prioritize her spending to make it work.
For an added lesson in budgeting, let your daughter plan a family trip or outing. Give her a set amount to work with and have her research and estimate expenses. Help her be creative in making choices that fit within the budget.
Set up a real savings goal