Giving Your Child an Allowance

Should You Give Kids an Allowance?Giving Your Child an Allowance

Is anything in the world of finance and parenting more debated than this – should you give your kid an allowance? Will it turn them into lifelong moochers or teach them valuable budgeting skills. In the Rich Mama’s humble opinion an allowance is a good tool for younger kids, when used as a way to regulate the “I want that’s…” Since children this small really do have a hard time doing jobs to earn money, an allowance can be a great way for them to learn to save up for that pack of gum or special toy.

According to some financial experts, giving your child an allowance is one of the best ways to instill solid financial skills in their young brains. Compared with a “pay as you go” policy, where you pay for what your child wants when he or she wants it, a weekly allowance can help your child better understand that money must be earned before it can be spent. This is a lesson your child certainly needs as an adult.

In addition, older kids are more influenced by their peers, especially where spending habits are concerned. Don’t forget you also have to contend with television commercials, radio ads, and other forms of media selling, selling, and selling. Managing an allowance at a young age will help your child more quickly grow accustomed to spending limits and restrictions.

What’s important if you’re going to give an allowance is to discuss what’s covered by the allowance. In other words you might not expect your kids to pay for their whole back to school wardrobe with their allowance, but if they want to go to the movies with friends, this might be an allowance item. Just make sure you and your partner sit down and discuss what you think you should be paying for versus what your kids should pay for with their allowance.  And then when you and your spouse are on the same page, then go start to negotiate with your kids.

Chores, Smores

With older kids, there are some families who have them do chores in exchange for an allowance. On the one hand this teaches the principle of now worky…no pay-ey…On the other hand moms and dads do a lot of crap around the house without any expectation of allowance, and if you’re teaching your kids that if they make their bed and get a dollar, then what happens when they’re on their own – and no one is giving them a dollar.

With older kids I favor the approach of chores that need to get done no matter what, plus a base allowance, plus an opportunity for kids to earn money doing extra jobs around the house. For instance if there is a job you would outsource, then consider paying your child for it. It could even be cooking a meal a week if it stops you from ordering takeout.

 

How Much is Too Much

So, how much allowance should you give your child? You can determine the amount in a variety of ways. Some parents and financial experts suggest one dollar for every year of age. Others say to set the amount based on how you expect your child to use the allowance, providing enough money to put in a savings account, give to charity, and to spend. Still others suggest giving your child an amount based on what other kids receive around the same age.

Whatever you choose, give it some thought, talk to your spouse and your child about a realistic amount, and start low rather than high. It’s always easier to increase a child’s allowance than to give him less because you started out giving too much.

As your child grows and matures, an allowance will help teach money management skills and develop responsible spending habits. Simply buying what your child needs and wants doesn’t allow the same learning opportunity. Giving an allowance may be a trial and error process for your family, but it’s one that is well worth the effort and learning curve. It will teach lifelong skills that your child will need—and thank you for—when your child becomes an adult.