Allowance is a tool for teaching kids that no matter how affluent the family may be, money is a finite resource.
Springfield, MA (Vocus/PRWEB) March 21, 2011
Parents who want fun ways to teach and talk to their children about money have a new free online tool, the Allowance Calculator, created by Jayne Pearl, co-author of Kids, Wealth, and Consequences: Ensuring a Responsible Financial Future for the Next Generation (Bloomberg, a Wiley imprint, 2010).
The Allowance Calculator helps calculate what a child’s allowance (or the price of anything) today was worth when the parents were the same age. For example, if 16-year-olds receives $20 allowance per week, that would be the equivalent to $2.86 in 1965 when a 45-year-old parent would have been 16. In other words, $2.86 in 1965 is the equivalent of $20 today. The calculator also lets users figure out, if the parent earned $20 in 1965, how much that would be worth today: $139.80. Another way to use the calculator is to input how much allowance the parent actually received at age 16, to see how much that would be in today’s money: If the parent received $5 in 1965, that would be worth $34.95.
“Talking about money can be difficult, or even taboo in many families,” say Pearl. “The Allowance Calculator is intended to offer a comfortable way to open up a dialog not just about allowance, but also about financial responsibility and financial values.”
The authors encourage parents to give allowance to children as soon as they acquire the ability to add and subtract, understand the value of different coins and bills, and express interest in buying things. “One way to determine how much allowance to give is to base it on a list of financial responsibilities that include discretionary (wants) such as music CDs, movies, supplies for activities, and nondiscretionary (needs) items such as toiletries, school lunches, and public transportation.”
The author explains that even wealthy parents should give their children allowance tied to financial responsibilities. “Allowance is a tool for teaching kids that no matter how affluent the family may be, money is a finite resource,” say Pearl. “Allowance also helps children learn how to delay gratification, make choices, and experience the consequences of those choices. These are important financial values that will help children grow up to be responsible consumers, savers and investors. In a society that is feeling the consequences of overspending and overuse of credit cards, kids who develop the discipline to save now and buy later instead of the reverse will be much more successful at surviving in any economic environment when they grow up.”
Other free financial parenting tools, including an Intergenerational Equity (sustainable spend rate) calculator, $mart $kills Allowance and Budget Controls (ABCs) spreadsheets, and online games such as the downloadable $mart $kills Asset Allocation Game, can also be found on the authors' website.
Kids, Wealth, and Consequences helps affluent parents and their advisors understand how affluence affects children’s future success, happiness and motivation. The book explores everything from how and when parents should talk to their children about the often-uncomfortable topic of money to what affluent families can learn from the economic meltdown about spending, saving and investing to help them better prepare themselves and their children to survive in any economic environment.
Jayne Pearl is a journalist and entertaining speaker, focusing on family business and financial parenting. She is author of Kids and Money: Giving Them the Savvy to Succeed Financially (Bloomberg Press) and has co-authored or ghost-written ten other books. Jayne began her career at Forbes and was former senior editor of Family Business magazine, to which she has contributed for 20 years.
Richard Morris is an adjunct professor at the Lake Forest Graduate School of Management and is principal of ROI Consulting, helping family owners expand and pass down their business to subsequent generations. Previously, he worked at his family's 80-year-old privately held company, Fel-Pro Incorporated, managing Marketing and then Acquisitions, and serving on the Board of Directors until its sale in 1998.
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