Laura T. Coffey • Profile • E-mail

Got money worries in your adult life? If so, be honest: Are some of those worries related to stubbornly bad money habits you find tough to shake?

Well, that just might be your parents’ fault. Financial experts say the money troubles that plague many of us as adults often stem from the way our parents raised us to view and handle money.

No matter what financial demons might be haunting you, though — from high credit-card debt to a non-existent savings habit to an inability to budget accurately for short- or long-term goals — money professionals say you absolutely can break the cycle for yourself and for your own children. One way to do this is to make wise use of a simple, time-honored tool: Allowances.

Success depends on how parents decide to play the allowance game. Fumble it, experts say, and children can learn all the wrong lessons about money and develop a sense of entitlement. Handle it well, and children can learn to be responsible decision-makers who know how to allocate their funds and live beneath their means.

“Just like we teach our children good hygiene, good manners — anything that’s a critical life skill — that’s what we have to do with allowance,” said Susan Beacham, a former private banker who founded Money Savvy Generation, a company in Lake Bluff, Ill., that teaches personal-finance concepts to children and parents.

“When you introduce allowance you have the opportunity to teach your child how to control impulses and delay gratification.”

Rules of engagement
Financial and child-development experts generally agree on some overall principles about allowances. For starters, they say children need to be given an amount of money that is age-appropriate and that allows them to make real choices — and real mistakes — so they can feel how much it hurts.

Allowances are a big deal for Jackie and Kevin Freiberg and their children Taylor-Grace, 15, left; Dylan, 6; and Aubrey, 11. “My parents are putting a lot of responsibility in my hands and a lot of trust. And I want my parents to be able to trust me with money,” says Aubrey.

“Eventually they’re going to … buy a toy that turns out to be a piece of junk, even though it looked glitzy in the packaging,” said Peggy Eddy, a certified financial planner and president of Creative Capital Management Inc. in San Diego. “I’d rather have my child make an $11 mistake than wait until he’s 50 and inherit from our estate and buy something stupid.”

Experts also recommend talking with young children about money-related choices before starting an allowance; paying kids in cold, hard cash because it’s less abstract than, say, a prepaid debit card; assigning them certain financial responsibilities and sticking to that arrangement without bailing them out; being punctual about payday; and being very, very careful about tying the allowance to routine chores. (More on that in a minute.)

Allowances are a big deal in the home of Jackie and Kevin Freiberg, authors and professional public speakers who live in San Diego. The Freibergs have three children: Taylor-Grace, 15, Aubrey, 11, and Dylan, 6. They’ve been giving the girls regular monthly allowances on a dependable schedule for some time now, but they haven’t started the allowance regime with Dylan yet because he’s still so young.

That’s not to say they aren’t teaching Dylan about money. When Jackie takes him shopping with her, she’ll have a pre-emptive chat with him before they enter the store. On some days, she’ll tell him not to pester her at all for any purchases. On other days, she’ll give him a spending limit — say, $5 or $10 — and tell him it’s his job to find something he likes under that amount.

“You can tell that he can choose more wisely now,” she said. “I’ll say, ‘OK, Dylan, what’s the better deal? This for $5.99 or this for $9.95?’ He’ll often make the better choice.”

For his part, Dylan loves this arrangement.

“I look at the price tags myself,” he said with pride.

And why does his mom set a spending limit for him?

“Because then you won’t waste money,” he said.

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