Whether a parent should give a child an allowance or not is very controversial but experts tell us that using an allowance can give parents and children more control over the children’s finances and it provides an excellent opportunity to teach kids what it is like to earn, spend, share and save money.
There are several theories in circulation about allowances and there are pros and cons to each. Here are just a few examples. Some parents give an allowance based on the age of their child. Some tie an allowance to grades in school while others pay for chores done around the house. Some older kids are allowed by their parents to earn money doing a paper route, helping with the family business and other similar activities.
What seems to be of paramount importance is for kids to have a source of “earning” money so that they can learn how to manage it. Some children will need to learn how to save. Others may be hoarders or need to learn how to share. Others may need to learn that ‘money doesn’t grow on trees” and having to “earn” money could be an important lesson.
Here are some considerations:
At What Age Should An Allowance Be Started?
A good time to start giving an allowance is when your child starts recognizing different denominations of money.
How Much Should You Give?
The amount of money you give as an allowance is really up to you. You don’t want to give too little or too much but it has more to do with what you want your child to be responsible for, and what you will provide for them.
Kids will spend more money on just about everything when it is your money they are spending. Why not try giving them more of an allowance with them responsible for more of their expenses. Of course you will need to sit down with your child and work this through and monitor their success.
As kids get older it’s reasonable that you pay them more. For example, you might expect your 11-year-old to pay for movie tickets, snacks and games at the arcade, but that basic expenses such as clothing and school supplies are your responsibility.
How Often Should An Allowance Be Given?
Paying an allowance on a weekly regular schedule is best for younger children. As they get older a monthly payment may work better and certainly helps them to improve their budgeting skills.
How Do You Get Them To Save?
Some kids will be natural savers others not so much.
You will need to understand your child and make the experience fun for them to learn the different options open to them. For the natural saver, encourage them to share with siblings, other family members, a charity or anything that meets with your approval. For the spender, try to steer then in the direction of putting aside a bit of money. Remember to make this fun and interesting for them. Perhaps this link might help: http://moneysmarts4kids.com/free-money-smarts-4-kids-kit/
Whether you buy into the idea of giving your child an allowance or not kids do need to learn how to handle money…and experts tell us that the earlier they have some access to money the better their chances are of managing real money when they grow up!
Money Smarts 4 Kids