“What is important for kids to learn is that no matter how much money they have, earn, win, or inherit, they need to know how to spend it, how to save it, and how to give it to others in need. This is what handling money is about, and this is why we give kids an allowance.”
Barbara Coloroso
Before you start handing over the dough to your eager spender, be sure that you and your child’s other parent are in agreement on the question “Are we ready to give our child an allowance?” Take some time to talk together about your attitudes toward money and what you want to teach your child about money. Were you taught that money is the root of all evil or the only thing you can count on in life? How do you each handle money? Who is a spender? A saver? If parents live apart, who will give the child an allowance? How will you split this obligation?
If you disagree, work out your differences before you put your child—and the very loaded issue of money—between you (see “
When Parents Discipline with Different Styles”).
1.What is a good age to begin an allowance for kids? Children should know how to count and be able to recognize units of money before they get an allowance. Begin an allowance either when the child starts school or when he or she begins to show an interest in money.
2. How much should I start with? Give your kids enough money to be able to make small purchases every week but not so much that they can purchase everything they want as soon as they want it. Look at what you can afford and factor allowances into your budget. It is best to under promise and over deliver.
Though they don’t get a vote in the matter, be sure to talk with your children about the allowance amount and why you chose what you did. Explain to them what you expect them to pay for versus what is money that they can choose how to spend.
3.Should children’s allowance be associated with household chores? This is a huge question that divides experts as well as parents. Experts who advise against basing an allowance on chores argue that chores are meant to teach family responsibility while allowances are meant to teach money management. It is possible that some essential household tasks (such as feeding the dog) could get skipped if a child decides to do without an allowance that week.
Other experts argue that giving children money for nothing creates a sense of entitlement and that money should be earned, not simply given. They suggest giving an allowance based on how much responsibility the child has around the house.
Whichever plan you choose, explain your reasons and expectations carefully. One compromise between these two conflicting opinions is to provide a base allowance amount that does not change coupled with basic chores, which are not negotiable. For any additional chores, a child can earn “extra” allowance. For example, a child may be expected to make the bed, set the table, fold clothes, and take out the garbage. For extra money, parents might agree to pay two dollars for scrubbing out the bathtub or five dollars for washing the windows.
4.Should I require my kids to save some of their allowance? Many family experts say it is better not to force children to save money from their allowance. Saving should be encouraged, but the point of an allowance is for kids, not adults, to manage the money.
If an allowance amount is set based on a child having something to save and no saving is happening, consider after a set period informing the child that since the money is not going to the intended cause, that the allowance amount will be lowered. However, tread carefully and don’t institute this consequence for one or two missed weeks, but only if the behavior is consistent.
5. How can I set up my child for success? Review your child’s allowance on a regular basis—at least once a year. Determine whether the child’s needs and costs have changed.
Don’t rescue your children when they make money mistakes. Rather help them figure out a solution. Explain that having and spending money is a privilege and that responsibility is part of the package.
For teenagers, consider giving a monthly allowance so that they can learn to budget money over longer periods of time. You may wish to set up a separate allowance for some items such as clothing or gifts. Make it clear that your teen will then have to keep track of the money to pay for each item assigned.