Where Is the Money Coming From?

For a budget to truly work, you need income. For a young teen this could come from a part-time job, gifts or an allowance. An allowance is a great way to teach the value of a dollar—how to earn it and how to appreciate it before it's gone.

Things to consider when establishing an allowance:

• How much is appropriate? This depends on your child's age, as well as expectations set for how the money will be used.
• How will the money be used? Be clear about what you expect. Is the allowance "fun money" or will it go toward essentials like school supplies? Generally, as kids get older, you might consider increasing the allowance with the expectation that they have to pay for more essentials. This creates a path of increased responsibility and helps prepare them for financial independence.
• How frequently will your child be paid? Generally, younger people grasp the concept better when there is a short time frame between payments, like a week. As they get older, you can lengthen time between payments, say from weekly to monthly, to reinforce the importance of planning and saving. For instance, if your teen puts all of her allowance toward new shoes right at the beginning of the month, and then doesn't have the money to go to the movies with friends later on, don't bail her out! This is a great opportunity for her to learn about financial consequences.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of savings and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction or strategy for his or her own particular situation. The examples mentioned are for informational purposes only and are not intended to represent results you should expect in the future. Data contained here is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.