Those who teach their children about financial responsibility from an early age can set their kids up to successfully manage their money for a lifetime. Many children get an allowance, but not all allowances are the same. Some kids get them for grades, some for helping around the house, and others just because. Before you decide whether or not to pay your child an allowance, consider the following.
When children learn about the value of money in school, giving them an allowance can be a good supplemental lesson. Use it to help them understand general mathematical concepts. You want to start at a time in which kids understand the values that you are trying to instill.
While it can be tempting to choose an amount at random, it’s easier to have a formula. Whether you want to base the payment on age, on national average, or by what other parents in the neighborhood are paying, having a formula will help you keep your own budget intact while also teaching children about fixed income.
Before determining your strategy for handing out allowances, let the kids have a say. Ask them what they think a reasonable amount would be and what they would buy with it. By engaging kids in the decision, they will feel empowered to manage their money.
Like adults, kids manage their money in different ways. While one child may conscientiously decide to scrimp and save for a big ticket item like a tablet, another may blow all of his cash the day after you give it to him. Recognize your child’s tendencies, but resist the urge to dole out more money just because your child spent his allowance.
If you’re going to ask that the kids do household chores, set the expectations up front. Don’t be afraid to withhold the allowance if the chores aren’t done, or aren’t done correctly. By being up front with the expectations, your kids will learn to be responsible about earning their money.
If you say that your kids need to do chores in order to earn their allowance, stick to it. If you give them an allowance regardless of whether or not the chores are done while saying otherwise, they may not learn consequences.
Children, especially younger children, shouldn’t have to bear the burden of contributing to average expenses. They are not responsible enough to manage a complicated budget and help out with groceries. Allowance should be for fun items like toys, games, going to the movies, etc.
When you set up the rules with your kids, make sure that they know what is expected of them. If they are required to do household chores before they get their allowance, then they should receive their allowance if the chores are done. It can seem like a good idea to withhold allowance as punishment for other behaviors, but this is not consistent with the plan, and will not enable them to learn the financial lessons that come with the idea of an allowance.
Everyone goes through times of unexpected cash emergencies, but don’t make your kids suffer for it. Keep their allowance in the budget as you would any other expense like gas and groceries. Up front, determine a reasonable amount, so you won’t be tempted to sacrifice their allowance to cover an unexpected emergency.
These days, everything is available with the click of a button, so you may be tempted to treat your kids to credits rather than giving them cash. However, this can backfire, since these online shopping accounts are likely tied to your debit card. Physical money also allows your child to have visual access to his or her savings goals. It can more easily help to establish a connection to “their” money.
Early financial lessons can help your kids develop a positive relationship with money and may potentially help them avoid financial pitfalls later in life. Do it responsibly, and they can develop good habits that last a lifetime.