Giving kids an allowance: what you need to know
Saving and spending money can be a complicated concept for kids to grasp, which is why many parents and caregivers start their little ones on an allowance. This weekly or monthly allocation is theirs to save and spend however they choose, with some guidance from Mom and Dad, of course. If done properly, your little ones might just grow up to be financially savvy, not to mention have a head start on saving up! But before you go opening up a bank account in your child’s name, take note of why, when, and how you should go about giving them an allowance.
Can an allowance make your child more financially responsible? Maybe. By instilling key ideas about when to save, spend, and give money early on, you can set your children up for success later in life. That means an allowance shouldn’t just be about your kid taking the money and running—it should include real discussions about what to spend your money on, why it is important to keep money for a long time, and how important it is to give money to those less fortunate. These conversations can be started by splitting the allowance you give into three piggy banks labeled “save,” “spend,” and “give.”
When should you start? As soon as your children begin to ask about money is the time to start thinking about an allowance. Reinforcing the difference between wants and needs is important when your children are young, and an allowance can help them better understand how those ideas apply to their life.
How much should you give? You should give your child however much you can afford, and no more. Factor the allowance into your monthly budget and see how much you can give. A good rule of thumb is one dollar for every year of your child’s age. That would mean seven dollars for a 7-year-old.
Should the allowance be based on the completion of chores? Experts debate on whether this allowance should be tied to the performance of chores. While on one hand, the relationship between work and money is a real-world experience that they can benefit from learning about early in life, doing chores around the house for no pay helps emphasize the value of helping out the family no matter what. In the case where an allowance is not tied to chores, children would receive money every month or week regardless of how much work they did. You will ultimately need to decide for yourself which method is best for your family, but it is important to think this through before implementing either system.
In the end, an allowance should be a fun, educational experience for your children as well as yourself. By encouraging them to save and spend wisely, you are setting the foundation for them to understand the value of a dollar down the line.
Should You Give Your Kids an Allowance? [Psychology Today]
Should You Give Your Child an Allowance? [U.S. News]
Giving Kids an Allowance: What You Need to Know [Art of Manliness]