How an allowance can teach your child basic values

The practice of giving a child an allowance developed a little over a hundred years ago, when child-rearing experts recommended giving children a regular and fixed amount of money so they would have respect for money. Allowances may seem to some people as an almost antiquated idea, something that was left behind in their own childhoods. But the fact is, if children are to be able to handle their finances as adults, it's important for them to start to learn how to manage money early.

Working to earn money

Children often have personal expenses, and a small bit of pocket money can save them embarrassment in front of their friends and help them feel more confident. Just remember that as adults, your children will have to earn their money by working for it; they may be a bit more budget-conscious if they understand the purchase price of an item equals a certain number of hours of labor.

Setting savings goals

An allowance can help your child with realistic goal-setting and saving. When you are deciding how much money your child's allowance will be, bear in mind that your child may see most large purchases as impossible goals that they will never be able to reach, which could result in him/her not saving at all. Help your kids set budgets so that they are able to buy small purchases and still able to save and purchase a larger item within a reasonable amount of time.

Here's a bit of nostalgia that perhaps says it best—Opie asking his pa for a raise in his allowance.