Allowance and Budget

I saw this article on MSN this morning about how kids spend their allowance and I thought it might be interesting from a media literacy perspective. From the girl who gets an allowance of $120 a week to the girl who gets $1 a week, the parents are making an attempt to teach their kids about financial planning and responsibility. I think understanding these things is a big part of teaching youth to be media literate. With the amount of advertising that is aimed at young people, the ability to scrutinize a product for the cost vs. value of the item in question is an important skill.

I wonder how much advice and education kids get about financial planning. I remember a single exercise in one elective class where we were given a bunch of classified ads and a yearly income and we had to choose an apartment and budget for food and expenses. I don't remember any real curriculum in school that taught about investing, loans, credit card management, or figuring out how much of one's income should be set aside for big expenses later. It's really up to the parents to teach their kids these things and I think a lot of young people miss this lesson at home.

I appreciate the lesson that both parents in the article are trying to teach, but I wonder how effective it is. Sure, the girl who gets $120 a week has to understand how to budget the money and use it effectively through the week and she even learns that she has to skimp and save sometimes to get bigger more expensive things she wants, but with the high amount of money she's getting (with no mention of any chores or special tasks she must complete in return, though they may have just cut that part out), it's hard to see that she's really learned the value of each dollar she gets. This is further brought into question when she shows us what she's saved to buy: an $80 gold necklace that says “superfluous” and $120 perfume.

In contrast, the girl who gets a mere dollar a week is learning about more than savings. While she may not be expected to use it to take care of all her expenses for the week, by giving her the motto that she should “save some for now, save some for later, and save some for the poor,” she's learning not just basic budgeting but she's also learning the importance of civic involvement and altruism. Also, by teaching her the benefits of using PayPal to keep her money instead of a savings account, she learns how to evaluate the benefits of one financial institution over another.

I'm curious about how my peers learned about these things growing up. Comment with your experiences if you feel like it.