Allowance and consumption

[gecko10x]

We have a nearly-5yr-old, and think it might be time to start with an allowance to give him a chance to really start learning about money. However, as we were discussing it this morning, there are basically two things for kids to do with money- save it or spend it- and it this age, there's not much (anything) that he needs to be spending money on, and I don't want to encourage spending just to teach him about money.

So my wife suggested some form of household store where we would set the prices for things that he could buy. Maybe snacks, game time, tv time, etc. What do you think of this idea? Has anyone done anything similar?

[galaxie]

NPR's Planet Money did a show about an economist who gave his daughter an allowance.  It was both entertaining and enlightening. 
http://www.npr.org/blogs/money/2010/08/20/129328075/the-tuesday-podcast-allowance-economics

[gecko10x]

Thanks, that was fun!

[arebelspy]

Is there a transcript anywhere?  The summary sounds fun.

[Heather]

My almost-4 year son has decided he wants to buy "laughing cow" cheese with the contents of his piggy bank.  He loves the picture on the package. I'm a practical shopper and don't buy things for the package.  If I follow my instincts and restrict my food shopping to healthy, sensible stuff, he'll always have something he'd like to upgrade to.   

When we were teen-agers my parents were loath to pay more for jeans just because they had little orange Levis tags on the pockets.   They provided us with the cash equivalent to a store brand of jeans, then we used our allowance to upgrade to what we thought necessary to survive in the school social order.  It was a good system because everyone felt it was fair.

[igthebold]

For what it's worth, I have very strong emotional memories of buying crap when I was a boy and regretting it severely, especially when I was manipulated into doing so by a friend. I've watched my son regret purchases, and I hope he's learning too.

Failure is an important learning tool, if used well. Fear of failure is a major hindrance to learning. Don't be afraid of your children learning things the hard way, especially when the stakes are so low.