How an Allowance Helps Children Learn About Money

June 18th, 2011 at 07:11am Under Economy Report

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This is the VOA Special English Economics Report.

Many children first learn the value of money by receiving an allowance. The purpose is to let children learn from experience at an age when financial mistakes are not very costly.

The amount of money that parents give to their children to spend as they wish differs from family to family. Timing is another consideration. Some children get a weekly allowance. Others get a monthly allowance.

In any case, parents should make clear what, if anything, the child is expected to pay for with the money.

At first, young children may spend all of their allowance soon after they receive it. If they do this, they will learn the hard way that spending must be done within a budget. Parents are usually advised not to offer more money until the next allowance.

The object is to show young people that a budget demands choices between spending and saving. Older children may be responsible enough to save money for larger costs, like clothing or electronics.

Many people who have written on the subject of allowances say it is not a good idea to pay your child for work around the home. These jobs are a normal part of family life.

Paying children to do extra work around the house, however, can be useful. It can even provide an understanding of how a business works.

Allowances give children a chance to experience the things they can do with money. They can share it in the form of gifts or giving to a good cause. They can spend it by buying things they want. Or they can save and maybe even invest it.

Saving helps children understand that costly goals require sacrifice: you have to cut costs and plan for the future.

Requiring children to save part of their allowance can also open the door to future saving and investing. Many banks offer services to help children and teenagers learn about personal finance.

A savings account is an excellent way to learn about the power of compound interest.

Compounding works by paying interest on interest. So, for example, one dollar invested at two percent interest for two years will earn two cents in the first year. The second year, the money will earn two percent of one dollar and two cents, and so on.

That may not seem like a lot. But over time it adds up.

And that’s the VOA Special English Economics Report, written by Mario Ritter. We invite you to share your family stories about getting or giving an allowance. Write your comments at voaspecialenglish.com — where you can also read, listen and learn with our programs and English teaching activities. I’m Steve Ember.

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Gold Keeps Shining, 40 Years After Nixon Ended Gold Standard

June 12th, 2011 at 07:51am Under Economy Report

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This is the VOA Special English Economics Report.

The best example of something is often called the “gold standard.” It sets the standard against which other things are measured. In economics, the term describes how major trading nations once used gold to set currency values and exchange rates. Many nations continued to use the gold standard until the last century.

In the United States, people could exchange paper money for gold from the eighteen seventies until nineteen thirty-three. President Richard Nixon finally disconnected the dollar from the value of gold in nineteen seventy-one. Some politicians from time to time call for a return to the gold standard.

But in nineteen seventy-eight the International Monetary Fund ended an official gold price. The IMF also ended the required use of gold in transactions with its member countries.

Since that time, gold prices have grown, but unevenly. Prices — uncorrected for inflation — are now at record highs. The current price is above fourteen hundred dollars an ounce.

But people keep buying. Neang Chan Nuon is a gold shop owner in the Cambodian capital, Phnom Penh.

NEANG CHAN NUON: “Some of my customers have even bought more as they believe the price will probably go higher. I sell more gold at these higher prices.”

Some people are “gold bugs.” These are investors who say people should buy gold to protect against inflation.

People have valued gold for thousands of years. The soft, dense metal polishes to a bright yellow shine and resists most chemical reactions. It makes a good material for money, political power — and, more recently, electrical power. If you own a device like a mobile phone or a computer, you might own a little gold in the wiring.

The gold standard was the subject of one of the best-known speeches in American political history. It took place at the eighteen ninety-six Democratic National Convention in Chicago.

William Jennings Bryan wanted the country to use both gold and silver as money. The idea was to devalue the dollar and make it easier for farmers to pay their debts. Here is Bryan reading his speech much later, in nineteen twenty-one.

WILLIAM JENNINGS BRYAN: “You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”

The speech made William Jennings Bryan famous. He was a presidential candidate three times. But he never won.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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Contributing: Pich Samnang

Correction: Nineteen seventy-one, when President Richard Nixon ended the gold standard, is 40 years ago, not 30 years ago as an earlier headline on this story said.

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