Unity One CU informs: Should you give your kids an allowance?

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Written by: Jeremiah Tucker. Originally posted on the CUNA Financial Resource Center.

Do you pay your kids an allowance? Should you? And if so, should they have to do chores to earn it?

As more people recognize the importance of financial literacy for children, experts are debating how most children are first introduced to the concept of money—the weekly allowance.

Ron Lieber, personal finance writer for The New York Times, says he and his wife pay their 7-year-old daughter $3 a week, no chores necessary. One dollar goes in a “save” jar and one goes in a “give” jar for a cause of her choosing. The final $1 she can spend as she wants. Lieber argues that an allowance is a teaching tool and making it contingent on chores muddies the issue. What if the children decide they don’t want money? Do they still have to do the chores?

Lewis Mandell, professor emeritus at the State University of New York, Buffalo, however, says unconditional allowances are a “terrible idea,” citing a study that showed kids who received a regular allowance with no work involved left high school knowing less about personal finances than kids who received no allowance.

According to a 2016 survey by the American Institute of CPAs, 68% of parents pay an allowance and require their children to work for it. On average, kids are completing chores about 6 hours per week and earning approximately $4.43 per hour.

The AICPA’s National CPA Financial Literacy Commission believes allowances (with or without chores) are a good way to teach children financial responsibility and encourages parents to talk to their children about good financial habits.

Here are a few tips to help you teach your own children how to manage money:

  • Use the allowance as a tool to reinforce good money habits from an early age. Talk about finances early and often, and set a good example. 
  • Consider matching their savings. To encourage savings, tell your children for every $1 they set aside for long-term goals, you’ll match it in their savings account. Then let them watch the money accumulate. 
  • Gradually introduce them to financial products. Start by depositing their allowance into a piggy bank, then a savings account, and later a share draft/checking account. 

Kids who learn to manage money at an early age are better prepared to handle their finances when they leave home. And, ultimately, teaching children good financial habits is a sound investment for parents; your child is less likely to find themselves in dire financial straits, needing you to bail them out. 

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Unity One CU informs: Building Your Emergency Fund

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If you’re like most people, saving money is easier said than done. A 2016 Bankrate.com survey revealed that nearly two thirds of Americans don’t have enough money saved to cover emergency expenses like a car repair or Emergency Room visit. Life is unpredictable, so it is important to make sure you are financially prepared. Whether you already have emergency savings or are looking to start, learn useful tips regarding:

  • Basic savings planning
  • Ways to start building savings
  • Where to keep your savings

Get started on the path to savings with our Life IQ financial wellness tools. They're free!

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Your Child's First Savings Account

There’s no better way to help a child learn the value of saving money than to actually help them save money.

One way to get them started: Make three jars. Label one for “playing,” one for “saving,” and one for “sharing.”

When they get a little older, it will be time to introduce them to the credit union, particularly Unity One Credit Union.

Obviously, children can’t enter into contracts with financial institutions on their own. As a parent or guardian, you retain overall control of your children’s accounts. You can set parameters to grant your children more control and more access to their accounts as they grow older and more mature, and you can revoke it at any time.

Children’s savings accounts are geGirl with piggy banknerally designed to accommodate smaller account sizes. At Unity One, there are no monthly or annual fees, for example, and only $5 is needed to open a savings account.

Keeping Children in Mind

Remember that children may want to make a lot of small deposits. For example, they may want to visit the teller every week, when they get their allowance. Your child can visit Unity One as much as he/she wants to. The best thing about most credit unions is that they don't charge teller fees.

Children will also frequently walk or ride their bikes to do their banking. If your child isn’t old enough now, it will happen soon enough! Look for a local branch in a location that is safe and bike friendly. Unity One's North Richland Hills location is located in a Birdville ISD facility with a security guard present during school hours. Talk about convenience, students at Fossil Ridge High School only to go as far their cafeteria to do their banking at Fossil Ridge Credit Union, sponsored by Unity One Credit Union.

Thinking Ahead

Small children grow up to be teenagers. Eventually, they will need a checking account. Is your child old enough for a checking account yet? When he/she is, can the savings account you open now be linked to a checking account?  

Remember that young people make mistakes with money. Will there be an overdraft protection feature available to cover the cost of the expense and spare them the embarrassment should they accidentally overdraw that account? If so, what fees are associated with it? Unity One's Lifeline package creates that oversight for parents so that teens learn about proper banking, instead of being penalized repeatedly.

Also, ask what will happen to your child’s account if you have to move. With the Unity One's online banking and mobile app, you can access your accounts whenever and however you prefer. Traveling is not an obstacle.

For information about Unity One Credit Union's savings accounts for kids or Ukids accounts, click here.

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