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YOKOSUKA NAVAL BASE, Japan — A knock on the door signals a parent’s nightmare: Your adult child, who you thought knew enough about managing money, stands before you with maxed-out credit cards and a stack of unpaid bills.

But don’t worry, he’s got a plan. He wants to move back home.

At that moment, you realize that maybe you could have done more to teach your child about personal finance.

For those for whom it’s not too late, what’s the best way to do this?

One method also happens to be that most ubiquitous of economic arrangements between children and parents: an allowance.

“I didn’t get an allowance,” said Petty Officer 3rd Class Jammie Cooper at Yokosuka. “When I have children, they will get an allowance. I think it is important because it puts children in a position to decide how to manage money — whether to save it or to spend it.”

Many experts agree with this philosophy, if certain steps are taken.

Sam X. Renick, founder and CEO of the It’s a Habit Co., which teaches financial literacy skills to children of all ages, wrote in an e-mail to Stars and Stripes that if parents decide to use an allowance to teach money management, they first should decide the goals and guidelines.

“The keys to allowance are a good attitude, consistency, simplicity, and clear ground rules,” Renick said. “Any allowance system a parent adopts or devises should be simple, easy to administer, easy to understand, and promote parent, child interaction.”

Renick said it’s also a good idea for parents to post the ground rules in a conspicuous place, like the refrigerator. That way, if there are ever any questions, the rules are easy to find.

But whether or not a child fully understands the rules at first, Renick said there are a few keywords that should be used and reinforced when discussing finances with children: manage, save, invest, compound, choice, decision, predict and frugal.

“When I was young, my parents would give me about $35 a week,” said USS Kitty Hawk Airman Abdul Aziz. “From an early age, I was making decisions about spending and saving money.”

A parent may say: “We are going to start to provide you with one dollar a week. This is your dollar to manage,” Renick said. “You get to make most of the decisions on how to use it.”

Master Chief Petty Officer Perry Wilson pays a weekly allowance to his two children.

“I use the allowance as an incentive to do their chores, and to give them some money to do things,” Wilson said.

The oldest of Wilson’s children, Perry Wilson II, earns $10 each week for doing the dishes, sweeping the floor and keeping his room clean.

“I think an allowance is a good way for kids to learn about money,” said the younger Wilson, adding that if he runs out of money, he usually can ask for more.

“He must be talking about on a really good day,” his dad said with a laugh.

Strategies for implementing an allowance

There are three guidelines parents should follow when starting their children on an allowance, says Collin Schriver, Yokosuka’s Fleet and Family Service Center financial educator:

Start the process by purchasing a piggy bank.“Have your younger children participate in daily chores, like putting dishes in the dishwasher, cleaning their room, making their bed or putting their dirty clothes in the washing machine,” Schriver said. “Each time they complete a chore, throw some change into their piggy bank together. The idea is that kids will learn that they have to work to earn money — it’s not just given to them. If they earn money, they are less likely to blow it.”

Hold firm on allowances.If your child spends her entire allowance the day after she gets it, do not give in to the “but, M-o-m …” whine factor.

“Children must learn that instant gratification, like spending all of their allowance too soon, is a behavior that can have unpleasant consequences,” Schriver said. “Hopefully, after a few mistakes, they’ll develop better money-management skills.”

Additionally, Schriver dissuades parents from “advancing” children their allowance: “It teaches them that it’s OK to live beyond their means, and as they get older, may lead to credit problems.”

Help children set financial goals.“Maybe they want to save up their money to buy a video game,” Schriver said, “or better yet, they want to save $500 in their bank account.”

Whatever the goal is, Schriver suggests having the child write it down on paper and share it with you. Their goal should be a detailed plan of how much money they will save each “allowance period” to reach their goal.

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