Your Child & Money

You the Parent as Investor

All parents of school-going children must face the question, "How much allowance should I give my child?" There is no right or wrong amount. Some factors to consider are the following:

The allowance should be big enough to cover the intended expenses (c.f., Prov. 30:8-9).

Most parents give the allowance for a snack and a drink during recess. Go and check out the prices at the school canteen. The prices of food and drinks are usually much lower than those outside the school.

Naturally, if the child has to take public transport, then the allowance should cover the MRT and bus fares (unless the child is using a Giro farecard and you are responsible for the topping up of the monetary value in the farecard).
The allowance should also be small enough to entail opportunity costs should the child choose to use the allowance for other purposes such as buying a gift for a friend.

In other words, the child must give up a drink or snack so as to set aside the needed money. This sacrifice will not be detrimental to the child's growth or health as most children would have taken their breakfast or lunch before going to school. Moreover, the sacrifice adds value to the giving of the gift.
The period for which the allowance is to cover.

Naturally, a weekly allowance would be bigger than a daily allowance.

Presently, we give our primary school children a daily allowance because we think they cannot manage a weekly allowance, at this age.

Later, we would have to give them the responsibility of managing a weekly (and then monthly) allowance. In the beginning, they may blow their weekly allowance early in the week and be confronted with "Money No Enough" for the rest of the week. But that is how they are going to learn ... by mistakes. Let them face the consequences ... don't bail them out by giving them more money.
How much you can afford

Don’t be pressured by your child when he comes home and tell you what his classmates are getting. If appropriate, explain the family budget in a way that he can understand.

Also assure him that you love him as much as the other parents who give more to their children. Or tongue-in-cheek, ask if he would like to change parents ... do this only if you are sure that you child is secure in your love.

Once Given, Twice Owned?
Once the allowance is given, does the parent still own the money? Should parents dictate how the money is spent?

I believe that the allowance once given belongs to the child. The child has the right to spend it in the way he likes.

However, future allowance is a privilege, not a right! It is a privilege that can be taken away if the child does not know how to use the money well. As parents, we have the responsibility to guide our children in making wise decisions in spending. If your child spends the allowance on candies or unnecessary stationery, explain the purpose of the allowance. It's okay to splurge or indulge occasionally but if the unwise spending persists, reduce or remove the allowance.

Your Child as Consumer

Sometimes our children receive birthday or award gifts in the form of money. We do not dictate how these are spent. The children have the right to spend their money the way they please. However, we would teach them how to shop, how to recognize quality, how to compare prices in different shops ... but we leave the decision to them.

We have allowed our children to make mistakes and see their money depleted ... with no more money for other things. A precious lesson learnt is that their supply of money is limited. Now they take a longer time to decide before making a purchase.

Your Child as Saver

Most young children would not appreciate the concept of saving money for "later" use. To encourage savings ... try this idea of saving for something the child would want to buy for himself.

Encourage the child to set aside a small amount every day for one or two weeks (depending on the value of the toy and how much the child is willing to save each day). At the end of the period, go with the child to buy the toy.

In many Singaporean families, all the "red packets" (money in small red envelopes) received by children during Chinese New Year go into bank savings accounts in the child's own name. A passbook is exciting because it is stamped every time there is a deposit and a new balance is shown. Highlight to them that the interest causes their savings to grow without any effort and the interest is higher when their account balance is higher.

Our children have pestered us for a portion of the money from the red packets to be set aside for toys but we have resisted thus far. We explained that they had received a number of presents and toys during Christmas and that the money from the red packets is reserved for their education.

Your Child as Giver

An important lesson to teach our children is that money need not be used for themselves alone. It can be given to others.

Giving Gifts - The whole process of giving gifts ... from planning to buying, wrapping, hiding and giving ... is very exciting! Help the child learn to give appropriate gifts by asking, "What do you think So-and-So likes or needs?"
Spending on Credit - My wife has allowed our children to borrow against future allowances for gifts to family members. Is this spending on credit? Is spending on credit wrong? If so, why? If not, why not?

The rich rules over the poor,
And the borrower becomes the lender's slave Prov. 22: 7

The Bible does not seem to be against borrowing (c.f., Matt. 5: 42) but states plainly that the borrower is a servant to the lender (Prov. 22: 7).

The borrower may be forced to mortgage his property and in the event that he is unable to pay, the property may be taken from him and he may be reduced to poverty (c.f., Neh. 5: 4-5).