Teaching Kids What To Do With Their Allowance

Once your kids have a little money, it starts burning holes in their pockets. It is time to help them learn how to manage that cash.

I recommend teaching kids to divide their money into three separate banks. You can use actual piggy banks, cute little decorative boxes, or simple bags to sort the money into a savings bank, a spending bank, and an offering bank. The money in the offering bank is what kids bring to church each Sunday to put in the collection plate.

Encourage your child to think of something she’d like to save for. My daughters like to save for special dolls or toys, as well as for summer camps. The money in the savings bank stays put until enough has accumulated for the desired item or activity to be purchased.

The spending bank funds your child’s pocket money. This covers those little “must haves” that kids spot while out shopping with you. My kids rarely bring their money with them when we go shopping, so I purchase items for them and they repay me when we get home. They also use this money for souvenirs when we go on vacation, as well as for buying donuts at church on Sunday morning.

I let my kids decide for themselves how much money to put into each bank. Amazingly, they generally put the bulk of it towards offering. If your kids do a pretty good job of splitting their money between their banks, let them do it independently. It does not need to be an even split, but each bank should be fed something every time your child gets paid. If you notice all of the money going into one bank, help your child learn how to split it up.

If you have a great idea for teaching kids to manage their money, please share it with us by commenting on this post.