Allowance Management Made Easy

(MoneyWatch)  Last week I wrote about author Joline Godfrey's take on an allowance and how it can be a valuable tool for teaching children how to manage money. But as one reader pointed out, some parents may need a little assistance showing their kids how to budget and save wisely. So I poked around the web and came across a child friendly software program that might help.

KidsSave is a money management and savings computer program developed by Karyn (a mom and educator) and John (a software engineer) Hodgens. With their program, parents implement an allowance and children watch the money grow (if they save their pennies) or disappear (if they spend it instead) in a virtual savings account. Think of it as a G-rated version of Quicken. And although the Hodgens recommend it for children ages six and up, after taking it for a test spin, I don't think teenagers will find it very cool, and might prefer a more sophisticated budgeting site like Mint.com. (Note: I'm currently test driving Mint.com and, so far, love how convenient it is.)

KidsSave does, however, includes some handy features that help parents teach young kids some important financial lessons.

Saving

Click on the "Goal Setting" tab and kids can set up a separate account that allows them to meet a financial goal, such as saving up for a new video game. The program helps them keep track of how much money they need to accumulate and visualize (with the help of a bar chart) how close they are to attaining their goal each time they deposit money into the account.

The Power of Compound Interest
In the "What If" section, parents teach kids how their money can grow if they deposit it into an interest bearing account. Mom and Dad choose an interest rate, say, 5 percent and the account shows kids -- again there are colorful charts involved -- how much that money will be worth in a few month's or even a year's time. Hodgens says her son, a spender, finally started saving money once he saw that his cash would be worth more if he just waited a little bit before spending his allowance.

Counting Money
Even the youngest kids can get a little something out of this program with the "Money Counter", which teaches children how to count coins and dollar bills.

KidsSave's Selling Points
I like that KidsSave is child friendly and that each account can be personalized. And, since kids are so enamored with their computers, there's probably a higher chance your child might actually listen to your money lessons if they get to play around with the software program on their own.

KidsSave's Shortfalls
As I mentioned earlier, the accounts are virtual. So while money appears to be going into the child's account each week, it really isn't. Parents need to play banker and reconcile the balance on the computer screen with reality. In other words, you either have to give your child the cash or transfer the money into a real savings account.

The program also isn't free. A copy of it will cost you $29.95. While I see nothing wrong with the Hodgens charging for their product -- they did develop it after all -- there are Mint.com and other free budgeting programs available online.

Even if you do try out KidsSave or another budgeting program, you'll still need to sit down and teach your kids how to manage money on a regular basis. No computer program can ever replace Mom or Dad.

Saving image by Ken Wilcox, CC 2.0.