Giving children an allowance may create bad habits (VIDEO)

Helping children learn about money should include teaching them that money is not just spent. (Courtesy of Money Savvy Generation)

WASHINGTON – Giving children an allowance just got complicated.

Experts say cash, earned or unconditional, without a discussion doesn’t create financial literacy – and that’s a problem.

Lewis Mandell, a University of Washington finance professor, tells U.S. News & World Report that 50 years of research on allowance shows children are more likely to be “slackers” if given money unconditionally on a regular basis.

These children “tend to think far less about money in general,” Mandell says.

But the problem doesn’t stop there. U.S. News & World Report reports children who are paid for chores or good grades also have an unsuccessful relationship with money. Kids learn that work isn’t fun and that the end game is always cash – and aren’t driven by a personal motivation to succeed.

Some children who aren’t given allowance at all, and instead need to ask for money, actually fared better in Mandell’s review of allowance research – perhaps because they have to think about the money itself.

“The kids who have to ask for the money have higher financial literacy than those who get allowances,” Mandell tells U.S. News & World Report.

Parents who give children allowances need to talk with them about money and finance.

This way they understand what money means and how to save it, spend it or invest it.

Parents also can share fun ways to teach kids about money.

Money Savvy Generation video offers advice on helping children set money goals:

WTOP’s Del Walters contributed to this report. Follow @WTOP on Twitter.

(Copyright 2012 by WTOP. All Rights Reserved.)

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