Cutting allowance can teach kids recession lessons

A lot of businesses like to say, "We're just like a family!" It's a comforting thought, but rarely true. Most bosses, for example, won't give you their secret recipe for potato salad, but they'll lay you off in a flash when times get tight.

You can't, of course, pink-slip your family members, but according to a new survey from Visa Inc., you can hit 'em with a pay cut. In a recent poll for the credit card firm, 41 percent of parents surveyed said they're cutting back on the allowance they give to their children.

Call me old-fashioned, but I think you'd need to be one step away from a deep, dire financial crisis, such as foreclosure or drinking domestic beer, before you clip the kids' allowance.

Crisis a teaching moment

But according to Susan Beacham, CEO of Money Savvy Generation and the Web site http://www.msgen.com">msgen.com, a financial educational service aimed at parents, teachers and kids, putting allowances on the budget chopping block not only makes sense but can teach youngsters a good financial lesson. It also can help them feel less frightened by our scary economy.

"It's best if this is a family discussion about cutting your budget and one idea that gets put on your table is what about cutting allowances," Beacham says.

In fact, Beacham says, she's done it in her own family.

After a few of her clients dropped off, income was down and the family had to look at steps to lower their expenses.

"We talked about ways we could cut and both girls offered $25 a month," Beacham says. "They felt good that they could kick in to help, but I guarantee if I had said, 'I'm taking $25,' they would have been apoplectic."

List family needs, wants

Many parents, she says, take the wrong approach to allowances, failing to tie the money to expenses their children need to handle so that the youngsters learn about saving and budgeting. But just cutting an allowance without explanation can make things even worse.

"Simply saying, 'Mommy and Daddy have less money,' is not a good approach. Then you've got a child thinking, 'Does this mean I won't have a roof over my head,' or 'Does this mean we won't have enough money for groceries,' " Beacham says. "It's only going to make the child confused, anxious and even angry."

Instead, she says, list the family's needs and wants, explain what you can afford and discuss the options to make up the shortfall. "Maybe one of the ways a child can contribute -- which is a very empowering thing -- is to take a smaller allowance."

So, if you get a pay cut at work, share it with your youngsters in a way that won't scare the kids but allows them to help keep the family financially safe.

Despite the tough times, I won't be cutting the allowance for my son, Li'l Money. Not because he'd protest, but because, without his piggy bank to raid, where else can I borrow $20 until pay day?

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