FAQ

My question is about how to teach my son to deal with money. He will turn 10 and in the school he attends everything is paid for by parents. The problem is that, if I give him R$ 5.00, he goes and buys everything he sees, regardless of the use. How can I teach him better? What am I doing wrong?
Calm down, calm down, calm down! First of all, we are here to talk about education. And education, including financial one, takes time to be absorbed. Therefore, it is better to "cool down" and try to understand what´s happening. Here we go: you say that once he used to save everything he received.Now, no sooner does he see some cash than he wants to spend it.From my point of view, the problem seems to be just lack of practice. Practice on how to use of money wisely. If you´ve read the books, you´ve seen that in order for children to be able to practice, it is necessary to give them an allowance (a weekly one at the age of 9). Don´t be afraid to give an allowance. With an allowance your children may even do the wrong thing and spend their money on petty things occasionally. Over time, and very quickly, they will learn. Think about it: your son is 9-years old and doesn´t know how to use his money? Great. It would be serious if he were 30 and made these same mistakes. And you know there are many adults like that. One more thing: let your son learn how to make his choices and bear the consequences. That´s what´s going to make you a proud mother when your son becomes a financial success in a few years´ time. Take it from me.

How can I introduce financial education in class?

This is a rather complex question. But here´s a tip that may help. The September ´99 issue of Nova Escola magazine published an excellent and detailed article on the subject. Click on the link to learn more Nova Escola

I´m 32 and I have two children, an 11 year old boy and a 2 year old girl. We have a difficult problem to solve. When Diego gets any amount of money he only thinks about what to spend it on. Even if he doesn´t need it, even if he doesn´t like it, he has to buy something. Why is that? What can we do to prevent him from suffering the consequences of mismanaging his salary later in life? And how should we handle Bea´s (2-years old) financial education?
If your son does not receive regular amounts on certain dates, it is unlikely he will ever be trained on how to spend. Start by giving him a weekly allowance. Will he excel at how to manage it from the start? Of course not. He will make mistakes many times. But he will learn at an early age that the misuse of money has its consequences. So by the time he gets his first salary, he will have learned enough not to get into trouble. One more thing: don´t forget that, just like in any other field of education, the financial education of our children takes time and perseverance. As for our friend Bea, when walking inside a supermarket, for instance, calmly draw her attention to the existence of expensive and cheap things. Just something like this: "Today we´ll look for something cheap to buy." Or, "Is it expensive, Bea?". I know she´s only two and will understand almost nothing. But soon you´ll see how she will begin to repeat these words herself. And ask you all the time whether this or that is expensive or cheap. This is one of the first steps to begin to realize that the use of money takes rationality. You can bet on it. I´ve seen it happen dozens and dozens of times. Come back with news and always bring your questions. It will be a pleasure to help.

The children of divorced parents should receive an allowance from which parents? We know the mother carries the heavier load. Would it be fair to give her this additional burden?
One thing at a time. In principle, the expenses to be covered by the allowance should not be new to the family budget. If before the allowance the parents would pay for the movies, snacks or transportation, for instance, all that will be done once an allowance is in place is to transfer the responsibility for controlling these expenses to the children. That´s why I doubt the allowance of your children will require a renegotiation of the support they´re getting. It will be no more than a "rearrangement" of the expenses they already have. Anyway, as I always insist, a part of the allowance should be used to teach your children how to save, which would require an additional amount to the one to cover expenditures. But you should already know that allowances should have their amounts limited by common sense. Even so, this additional amount will not drastically affect the child support agreement. Discuss with your ex-husband the need to give the children an allowance and make sure he is willing to cooperate. In the case of ex-couples, deciding "who pays the allowance" is seldom the hardest part. What´s much more complicated is to convince the partner not to violate the agreement by giving the children extra cash on the side. That´s why it is important that you discuss the matter and agree on the amount of the allowance and the expenses it will cover. Do come back if you need. Good luck.

I have doubts as to how I should act regarding what I already have and what I will leave to my children in case I die.
Great question. Concern for the future of our children in a situation like this should receive our constant attention from the day they were born. I know it´s not an easy subject and it´s painful to imagine this scenario. However, because we love our children, we must think of ways to reduce their pain in case of our death. It is essential to obtain life insurance and make a will stating that how your money should be distributed. Check with the bank that handles your mortgage to find out what actions should be taken to ensure the property is paid for in this situation. One further issue that should be considered: in the event the parents die, who will become responsible for the children´s education? Just between us, grandparents are often chosen for friendship reasons rather than for being persons that one day may assume the responsibility for our children´s education. On the other hand, the age and health of the grandparents must also be considered. Someone whom you and your husband really trust and see as a role model for your children should be approached about this task. On a final note, congratulations on your valiant concern.

I´m an 11-year old boy. My father does not give me a regular allowance (1 real here, 3 reais there.) I want to know whether I should receive a monthly or weekly allowance. And how much should I receive? Now hear this, sir: Whether or not to give a child an allowance is a decision that is entirely up to each family. In order for your parents to learn about the advantages of an allowance and how it should be given, invite them to take a tour of the website. If they agree, you may receive some money as an allowance. If you prefer, you can begin by receiving weekly allowances until you get used to it. As for the amount, I generally recommend that the parents give 1 real per year of age, per week, until the age of 10. So you might begin receiving like R$ 44.00 per month. But this, of course, depends first and foremost on your parents´ budget. This money should be used both for buying things that you need and for saving part of it.

I have two sons aged 10 and 12. I usually give the same allowance to each of them. If I applied your formula, one would receive R$ 10.00 per week and the other would receive R$ 12.00. The fact that these are different amounts would cause turmoil in my house. What should I do?
Take it easy. First of all, the fact that they have different ages suggests that there should also be a difference regarding maturity, degrees of responsibility and obligation and also different consumer needs. Therefore, it is only fair that the eldest should receive a little more. Will the youngest one make a fuss? Certainly. Even if you remind to him that an allowance is not a gift, only a financial education instrument. I can´t guarantee that he will stop complaining. However, even against his will, he will understand the rationale for the amounts being different. It is as logical as the fact that the eldest brother will drive or vote before he will. Furthermore, don´t worry too much about the youngest one´s pressure. We all know there will come a day when the age difference will finally be favorable to him. And it will be the eldest one´s turn to complain about such "unfairness".

I have two sons aged 6 and 8. In a sequence of negative experiences, we moved to a new job in a new town and everything went wrong. I feel guilty and insecure about their fate. How should I act?
I keep wondering what might have happened that caused this bad period. Can it be that it happened in spite of you being guided by common sense, like taking the precaution of saving your money "for a rainy day"? Or maybe there was a bit of "biting off more than you could chew"? In any event, knowing the reasons that led to this phase is important so you can evaluate your mistakes and try not to repeat them. Here on this website, on the articles page, there is a text that may help you discuss this subject with your children ("Daddy lost his job. What´ll we do now?"). And try to remain calm. Bear in mind that your children are young and the entire family will have plenty of time to recover from these bad times.

How can I teach the real purpose of money to a 2-year-old child who is curious to touch money and understand what it is for?
First of all, show different coins and bills to your child. Make the child realize the differences that exist among them in size, shape, weight and design. Do not care about him or her associating the coins or bills to the correct value right away. This will happen naturally over time. Show him or her the care necessary when holding money. When going to the supermarket (or pharmacy, newsstand, bakery, etc), take the child with you and let him or her give the money to the cashier. Get him or her used to words such as: change; expensive and cheap. He or she will quickly and gladly incorporate these words to his or her vocabulary.

What is the percentage should the family spend on the following items: food, leisure, education, healthcare, savings, transportation, clothing, etc.
This is the sort of analysis that should consider several specific aspects that you don´t mention. For example: what the family income is, how old the family members are, whether or not you have a home of your own, if you already follow any kind of savings plan, what kind of transportation the family uses, etc. There is not a strict pattern for these things. It all depends on a detailed analysis of the financial possibilities and priorities of each family. To risk making a guess would be irresponsible and frivolous.

I am in doubt on how much to give to an 11 year-old kid as a monthly allowance. I´ve searched other websites and the answer I find is usually R$ 300.00. I think this amount is rather high, even if the instructions are that he should use this money for everything (both important things and entertainment). One more thing: should this amount vary from year to year?
The instructions you received are obviously absurd. An allowance should give the child the means to establish and observe a budget. With that much money, the child will have no need for a budget. In this case, why then give an allowance? As a general reference I usually suggest that the parents compute the amount to be given according to the following policy: 1 real per year of age, per week. According to this formula, your son should receive about R$ 44.00 per month. Of course, some variations may be acceptable considering the expenditure needs of the child. I mean small ones! Some of the answers contained in this website already deal with this topic. Read them. On a final note, a tip: soon the article "How to compute an allowance?" will be posted and you will find the answers to all your questions in it.

Why is it important to give an allowance to children?
An allowance is important for their financial education, but it is not essential. Apart from that, it is good to bear in mind that it´s not easy to give allowances. Generally, by not knowing the subtleties of the matter, parents ultimately do it all wrong and the act of giving an allowance ends in disaster. Here on this website you will find several articles that deal in various aspects of allowances. I hope they can be of help.

My daughter is 8-years old and I intend to start giving her an allowance. I would like her to realize how saving is important so we can get what we want. However, I´m in doubt about the amount to be given. According to your formula, it should be R$ 8.00 per week. Should the price of the snack be included in this amount or should this be given as an extra?
The expenses to be covered by an allowance always depend on the negotiation among family members and should consider, among other things, the degree of maturity of the children. Anyway, in the case of school snacks, it is quite reasonable to include its costs in the amount to be given. Just compute the average expenses for a trip to the cafeteria and add them to the amount resulting from the formula. Don´t forget to teach your daughter that she should not take all her money to school, only the amount to be spent each day. Finally, an important reminder: since she´s only 8-years old, her allowance should be paid weekly.

I have doubts on how to conduct my own financial education. I can´t deal with money. How can I learn?
Since I don´t know how old you are, I´ll give you some hints that apply for any age group. You should know that few people have an inborn gift to deal with money. So relax. Most people have the same problem as you have. The difference, and it is a very important one, is that you are aware of this problem and willing to change it. This is the first step, from which everything gets easier. Concentrate on the following: using money takes intelligence and strategy. Learn how to set your short-, mid- and long-term priorities and turn money into an ally on the achievement of your goals, saving in order to reach them.

I have two daughters, one is 7 and one is 3. I´d like to know whether I can begin giving them an allowance. How much?
From the age of 3 to 10 the child should receive weekly allowances. In order to stipulate the amount to be given, the formula I recommend is 1 real per year of age, per week. Therefore, in principle, the eldest daughter should receive 7 reais. The youngest one, only 3. But remember to teach them that half this amount should be saved for some extremely short-term goal.

My son is going to turn 7 and, when he was born, we opened a savings account in his name, which now amounts to 12 thousand reais. We told him that this money is for a car, to pay for college or other courses here and abroad. The problem is that we never told him how much money he has, as the amount is too high for his understanding. So we have not had fun opening the bank statements with him, as I´m afraid he may think he is "rich" too soon. What should we do?
First of all, congratulations on your effort and perseverance in making savings for your son. As for your concern about the figures, the fact is that, for a 7-year old kid, any amount a little higher than the one he is used to dealing with will look like a fortune. So R$ 100.00 or R$ 12,000.00 will make him feel a millionaire just the same. In fact, your concern is sound and perfectly understandable. That´s why I think some things should become clear before he is invited to have fun opening the bank statements.  First of all, explain to him that the savings account should be regarded, most of all, as the fruit of your effort. Secondly, the amount deposited is a family matter and should not be boasted about under any circumstances (make it clear that acting otherwise would be bad manners).  Finally, teach your young son to allot a part of his allowance for his own savings (separate from the one you´re setting aside), for short-term goals. This way he will learn to value his own efforts from the start.

I´m 16 year-old and I want a little more financial independence. I want to be able to buy my clothes, snack at school and everything else with my allowance money. I make a point of buying everything with my own money, but with this weekly R$ 1.00 per year of age scheme I will only get R$ 64.00 a month. That´s not enough for my independence. What should I do?
First of all, you should consider whether your parents agree to the idea. Secondly, consider whether their budget allows for a significant increase in your allowance. Once that is resolved, it´s time to negotiate with them for a new amount that considers your new needs (your average expense with school snacks; how often you buy clothes, leisure expenses, etc). Anyway, Fernando, one thing should be clear. A raise in your allowance will require more maturity and responsibility from you when dealing with your money. Finally, do not forget that real financial independence will only come when you begin working and earning enough money to support yourself. 

Since I´ll begin giving an allowance to my daughter, and part of this allowance should be allotted to her "savings", I though about opening a real savings account for her. Is it still worth it to invest in savings accounts, in spite of interest rates being so low?
The savings account is the safest type of investment in the market, hence the low interest rates. Apart from that, it is the easiest type of investment to be controlled an understood. Because of these characteristics, it works as a sort of introduction into the financial world. As your daughter grows older, start to show her that there are other, more sophisticated types of investments. I insist that, for a beginner, a savings account is recommended. Take your daughter to the bank and encourage her to ask the manager all the questions she wants. One last detail: regardless of your daughter´s age, read the bank statement with her. And celebrate together the outcome of your effort.

I have a 14-year-old daughter who wants to be a model. She has even registered at an agency. As soon as she begins to work, I´m not sure how to guide her regarding money. How much should I allow her to spend, since I think saving and investing are more advisable? It is the beginning of a career that often involves not only good pay, but also a long time without earning anything.  I would appreciate some guidance.
One thing at a time. I´m sure your daughter must be very special and I wish her all the luck and success. However, as you must know, the modeling career is not only short but very competitive. Nowadays, in order to win a place in this tough field of work, the model is expected to have more than just a "pretty face". First of all, she should be able to manage her own career. That´s why my advice is that you prepare your daughter to develop abilities that will be quite useful during and after her career. Encourage her, for instance, to learn several languages and, of course, be adamant in your demand that she finishes her studies. Finally, she should save, invest and prepare for the rainy days.

I have a 5-year-old son. What reason could I give for him to get an allowance? Certainly not candies, chewing gum or soft drinks, as my wife and I do our best to restrict his access to such products, in spite of the big influence of the school.
You should make it clear why you decided to give him a weekly allowance (so he can begin to learn how to deal with money from an early age, hopefully.). Help him plan his goals for the 50% he´ll set aside as savings (toys, cars, games, etc). As for the rest of the money, it is most likely that, over time, the candy phase will be gone. Till then, try to set a day of the week for the consumption of these things he loves so much. In any event, if you think he´s indulging too much, do not hesitate in setting limits to such consumption. But be careful to take this action as a last resort, only. To the extent possible, let him learn how to make his own choices and live with the consequences. Let him learn, for instance, that if he continues spending all his money on chewing gum, he will not be able to buy that soccer shirt he wants so badly any time soon.

I have two daughters: one is 13 and the other is 15.  I would like to know what their allowances should be more or less. And what should they include?
The 13-year-old one should receive about R$ 52.00 per month and the 15-year-old one, R$ 60.00. This is just a general guideline, so of course each family should consider the needs of the child who will receive the allowance (Do they have a snack in school? Do they use public transportation? etc.) and the possibilities of the domestic budget. Take these amounts as references and adjust them after talking with the girls. As for the expenses to be covered, again, there are no rules. It´s something that each family establishes according to convenience and structure (whether to include clothes, school supplies, gifts for the friends.). Of course, the greater the number of expenses to be covered, the greater the allowance should be. Finally, try not to deviate too much from the amounts established above. An allowance exists, among other things, to create the need of a budget and to encourage the habit of saving. So leave some of the money to be given allotted for this purpose.

I almost always take my 6-year-old daughter to cultural activities for children on weekends (theater, movies, circus, etc). I would like to know whether the expenditures with these activities (ticket, popcorn, soft drinks) should be deducted from the weekly allowance.
My opinion is that she is too young for so much rigidity. Certainly these activities are fun for both of you. It is better not to create situations that may disturb such pleasant moments (such as: "I can´t go because I´m out of money."). When she´s a little older, things will change. Till then you both have a long way to go.

Why do children ask for so many things?
Because children want everything. Adults are like that, too. The problem is that no one can have everything he or she wants. No one. If you don´t get used to it while you´re growing up, realizing that you have to make choices, you end up reaching adulthood with an irresponsible and selfish behavior. And most of all, an unhappy person.

I have a 10-year-old nephew who has been getting an allowance since the age of 6. The problem is that he always asks his mother for money (and she always gives it to him) either to spare his own or because the allowance money is gone. I´m afraid to start giving an allowance too early and this may happen to me as well.
The only purpose of the allowance - and in the case of your nephew, he should get a weekly allowance - is to teach the child how to deal with money. What´s been happening in this case has no relationship whatsoever with the age your nephew began receiving the money. In order for the allowance to work properly, the parents must be convinced of its educational nature. The scenario you describe requires that the parents immediately take some time to think about the way they´re acting. An allowance, given at the right amount, is an excellent financial education instrument. However, the way it´s being done in this case, it may have disastrous consequences for your nephew´s education.

Isn´t the practice of giving an allowance (either monthly or weekly) likely to cause more harm than good? Won´t the fact of receiving money without giving anything in return create bad expectations in the mind of the child?  Of course the child should not be required to work to receive an allowance, but shouldn´t any kind of help at home or a certain behavior be rewarded with money?
This is a common doubt among parents. The only purpose of an allowance is to be an instrument for the child´s financial education. However, even considering this fact, parents are often confused about the process of giving an allowance. Of course there are no rigid rules about it, but my experience as a financial educator indicates that some agreements work better than others. Such is the case of tying the payment of the allowance upon the performance of chores, which is difficult to implement in practice. The reason is simple: it may happen, for instance, that your child will refuse to perform such tasks, say, in a week in which he or she doesn´t need the money. In cases like this, your authority goes down the drain and so does the financial education of your child. The same reasoning applies for making the allowance depend upon the child´s behavior.

How can I provide financial education to my children without running the risk that they grow up to be stingy, selfish and overvaluing money, living only for money as a thing in itself?
The fact that somebody overvalues money is, in itself, a clear symptom of lack of financial education. Having money cannot be the most important thing in anyone´s life. But it´s true that, if we don´t pay enough attention to the way we deal with money, sooner or later, our financial mess will not leave us enough time or energy to take care of those who should really be more important to us than money.