Should You Give Your Kids An Allowance?

Kid’s Allowance Teaches Money Management

First Published Date : April 13, 2011 ADawnJournal.com

Prelude

An allowance is an amount of money you give to your kids on a regular basis to cover their expenses. Experts have always debated over whether kids should get an allowance or not. One group says giving an allowance teaches kids nothing and it might even ruin their finances in the future. Another group says an allowance teaches children money management skills (through responsibility and discipline) and prepares them to better handle their finances in the future. I believe in allowances and if used properly, it can be a great tool to teach your kids finances at an early age. Today, I will present my perspective and will provide you some tips on this debated topic.

Why Kids Should Get An Allowance?

Responsible parents look after the family and meet its members’ needs. An allowance helps to meets family members’ needs. An allowance is an example of parents’ responsibility. A lesson kids are practically observing right here – responsibility.

An allowance nurtures the children’s ability to think and act independently. Don’t expect them to always spend their allowance properly. The objective here is to make mistakes and teach them to correct themselves as they go along.

Once kids have their allowance in their hands, it tells them something very important – money is not unlimited. This reinforces the idea that they have to spend it wisely (i.e., it teaches how to best make choices between many things) once they know that each time they spend on something, they will have less than they did before. You will see a significant reduction in their “I want this” items. This is how kids learn the concept of “discipline” and “money is limited.”

At What Age Should Kids Get An Allowance?

Kids start showing coin recognition and interest in basic money concepts as early as four. Depending on your kids’ interest and your comfort level, parents can start giving an allowance as early as age three to five.

How Much Allowance Should Kids Get?

There is a common approach on deciding an allowance – a weekly allowance representing a total amount equal to $1 for every year for age. For example, a four year old would get $4 every week.

However, I think this basic approach will not work in most situations as there are many other allowance deciding factors coming into play. You should consider the following factors when deciding on an allowance:

·    Your Income – Only you know what you can afford to give and what you can’t.

·    Your Kid’s Age – As they grow bigger, the allowance amount should increase as well to cover additional cost kids need to handle every year.

·    What The Allowance Should Cover – Be clear on what it should cover and what not, and then add all expenditures to check if this allowance amount is realistic enough. A good way to do this is to make a list of all items you think their allowance should cover and discuss it with your kids; this ensures that no important items are missing and that your children are kept involved in the process.

·    Where Do You Live? – You may want to consider the neighbourhood you live in when deciding an allowance amount. Do you think a kid living in Red Lake should get the same allowance as a kid living in Toronto? I would keep this is mind while making a decision.

Allowances and Chores Should Not Be Tied

It is not recommended to link allowances and regular household chores. Chores are regular family responsibilities and should not be tied with allowances. However, kids can get paid for special projects for which you would normally seek outside help such as cleaning the backyard, painting jobs, etc.

Keep Clothing Allowance Separate

You may find some type of allowances, such as clothing allowances or book allowances, are not easy to blend into regular allowances. An easy way to handle this is to keep these separate. For example, give your children a clothing allowance in the winter for winter clothing, give them money to buy books when the needs arise, and so on.

Do Not Give an Allowance without Proper Guidelines

The basic purpose of giving an allowance is to teach kids money management skills. If you just throw some money at your kids without proper guidelines, instead of teaching them money management skills, it will teach them indiscipline and bad money management skills. Always give the allowance with proper guidance – show them how to spend it and break it down into small pieces, such as 10% should go to the piggy bank, 10% for a science magazine, 10% for charity, and so on.

Last Word

Money skills are not taught in school. Giving an allowance in a responsible way can open up endless possibilities to teach kids money skills and financial responsibility, and the lifetime results are immeasurable.