There are a lot of reasons to give children allowances. Letting children earn and manage small amounts of money teaches them about budgeting, spending, saving, and giving.
Plus, if you’re in a home where allowances are tied to chores—or a home where allowances are given freely but extra money can be earned by completing certain tasks—children learn what it feels like to earn fair financial compensation for a job well done.
However, you should also teach your children what it feels like to go into debt.
There are two reasons why focusing on what you do with the money is more important than focusing on how much money you have.
First, because it’s always a smart idea to have a plan for your money. Sometimes there’s a specific plan: maybe you’re saving for retirement, for a down payment, or for a once-in-a-lifetime vacation. Other times, you’re saving and investing money now because you want more options in the future. (That still counts!)