With financial illiteracy on the rise, experts are urging parents to adopt an allowance system to instruct their children on how to handle money as early as possible. Relevant reports seem to suggest that Gen Zers view money as this sort of vague, inexhaustible resource. According to a new survey funded by AIG of over 30,000 college students from 440 institutions and 45 different states, 60% of new grads intend on leaning on loans to cover their tuition bills and 35% have no plan or intention to pay these loans off in time or in full.
InvestmentNews reports, that even though, 78% of financial advisors agree that financial illiteracy is a pressing concern, only 25% are addressing the problem with any sort of utility. Joey Watts of The Tribal Tribune explains, “Everyone needs to know the basics: how to write a check, how to open a checking and savings account, how to take out a loan, how to pay your bills, even how to make a basic budget for yourself. Those are givens, and things that are not always taught to teens by their parents or school. But it’s also important to understand how credit works. One hundred and fifty-seven million Americans have credit card debt. That number should be zero.”
What better way to instill healthy habits that to incorporate a practical use for them? By entrusting your child with an allowance, you teach them how to budget and manage money before they are required to so with much higher stakes.
A penny earned
RoosterMoney just released its annual Kids Allowance report, which explores the financial habits of 20,000 U.S families, with kids ages four to fourteen. On balance, the 73% of parents that give their cubs an allowance, report a median amount of $8.24 a week, which is roughly $107 a summer and $428 a year. The majority of these wages are beholden to specific chores and age ranges (younger kids tend to make just under $4 a week compared to 14 years old which pull in around $11). So exactly what are the most lucrative tasks for a training wheel magnates?
1. Washing the car ($5.26 an hour)
2. Gardening ($2.55 an hour)
3. Washing Windows ($2.42an hour )
4. Vacuuming ($1.75 an hour)
5. Walking the dog ($1.55 an hour)
Refreshingly, the average kid only spends 65% of their earnings, while saving 35% of it. The larger half of their wages go toward cell phones, Lego sets, Nintendo Switch, dolls, and watches interestingly enough.
“It’s great to see how kids are earning their money and the positive saving behaviors they’re developing,” explains Will Carmichael, CEO of RoosterMoney. “We’ve always believed the key to building good habits lies in talking about money from a young age, and with the summer here, it’s the perfect time to start having those positive conversations about money.”