For some parents, an allowance is a way to teach financial responsibility to their children. Others believe that money ought to be kept off the table while families focus on pulling together.
Whatever choice you make, there are some important principles to keep in mind. Consider these suggestions for giving allowances to your children.
Giving Your Children an Allowance
1. Pick a starting age. Kids are ready for an allowance when they can understand the different values of currency. That’s usually when they’re about five or six years old.
2. Determine the amount. The old rule of thumb estimating 50 cents or a dollar for each year of your child’s age is still a good guideline. You also need to consider the financial situation of your family and what expenses the allowance is intended to cover.
3. Clarify the rules. The American Academy of Pediatrics takes no definitive position on allowances. However, they do say that the rules regarding allowances need to be clear. For example, if you require 10 percent to be put towards savings, explain your expectation from the start. And remember to enforce your rules!
4. Be consistent. Pick a payday and stick to it. A weekly schedule is often the most convenient.
5. Keep discipline separate. To get the maximum value out of using an allowance to teach financial skills, use other methods to discipline your children. Restrict computer time rather than withholding a child’s allowance.
6. Tackle the chores issue. Linking an allowance to the completion of certain chores tends to be difficult. You may decide that paying for performance is the way our society operates. On the other hand, you may instead want to encourage family teamwork apart from direct compensation.
Using Other Methods to Teach Financial Responsibility
1. Create a family fund. Consider allocating some money that all family members can collaborate about when it’s time to spend it. Hold family meetings to discuss vacation budgets or buying back to school supplies.
2. Prepare for special purchases. Kids will want to make some larger purchases. Be willing to listen to their reasons for wanting to buy a musical instrument or new sports equipment.
3. Provide opportunities to earn money. Children can still have a chance to acquire their own funds if you pay for special tasks. That might include raking the autumn leaves or cleaning the barbecue grill at the end of the summer.
Tips for All Families
1. Encourage philanthropy. Help your kids develop a habit of giving. Talk about the charities you support or a nonprofit group that has helped your community. Praise them for doing their own research on causes they are personally interested in.
2. Promote savings. Show kids how even saving small amounts can dramatically add up over time. Talk about short and long term goals. Buy a piggy bank for small children and assist older ones with opening their own bank account.
3. Decline advances. Allowances teach kids about trade-offs and rationing their money. Resist the temptation to provide a bailout. Make them wait until next week if they spend it all.
4. Be flexible. On the other hand, there may be times when you cut your children some slack. Maybe your 10-year-old son buys comic books with the money that was supposed to cover his school lunches. You’ll want him to keep eating while you talk that over.
5. Look for outside income. Every family member can find ways to earn money outside the home. Kids can babysit, shovel snow, or sell crafts online.
Different strategies work for different families. Whether you decide to grant a regular allowance to your children or keep all your family funds together, you can raise your children to be financially savvy and responsible.