When my younger son, now 27, was about 7, he talked me into giving him and his brother raises in their allowances. I agreed, but said they must put half of each allowance into their savings account. Plus half of birthday or Christmas money from the grandparents. As it happens, a local bank where we lived (Overland Park, KS) had a delightful program for kids they called Moola-Moola and the Moneyminders. On Saturday at one specific branch they had some dressed up in a Moola-Moola costume, free popcorn and candy, plus a couple of tellers working at child-sized desks. They also put in an extra dollar when the kid first opened the account. It was great fun.
The people at the bank who dreamed up this program were no fools. It got the kids and their parents into the habit of going into this bank and so with any luck, later on some number of them would take out car loans or mortgages from them. The best part, of course, was how the money grew over time. I recall a teller commenting, when my son had maybe a thousand dollars in the account, that the kid had a whole lot more saved than he did.
The real payoff in the end was that each son bought his first car with cash. I think the cost of a car can be a huge trap for many people. Cars symbolize so many things in our culture, and for too many people they are closely tied to their ego and public image. The car ads on TV are very seductive. It can be extremely difficult to resist the temptation to buy your dream car, not the one you can actually afford. If a kid is held to paying cash for the first car, it may be much easier later on to resist the manipulations of the manufacturers, and stay always with what is affordable.
Money is largely invisible to children and teens. We parents pay for everything, and whether we have a little or a lot of money, and even though we may talk occasionally about whether or not we can afford something, it doesn't really sink in until the kid becomes responsible for at least some of their expenses. One good way (I have to say I didn't do this) is to figure out how much money you spend each year on the kid's clothing and give that amount to the child as a clothing allowance to be spent as the kid wants. I've heard that it is especially effective with the ones who want all the designer stuff.
An allowance is another thing, and there is more than one way to handle it. I was of the school that the allowance is pure spending money that they can spend as they wish. Other than, in our case, the enforced savings. But what was left was their to squander as they might.
I know we did something right, because neither of my sons has any debt to speak of. Each is living well within his means and has money in the bank.
I've long said that one of the most important things we can do for our kids is to teach them how to manage money, whether they'll have a little or a lot of it.
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