Parents may have strong feelings about giving children an allowance. They may feel strongly in favor of giving an allowance, believing that this teaches children money management. They may be strongly against giving an allowance for fear of creating a sense of entitlement in their children.
And then there are the parents who fall into neither category—neither for nor against giving children an allowance. They aren’t sure how they feel about the idea. They wonder whether chores or responsibilities should be tied to allowance-giving. They wonder at what age an allowance should be given. Most of all, they wonder what is the appropriate amount per age?
One reason a regular allowance, untied to specific responsibilities, is a good idea is that it teaches children all sorts of important lessons. First of all, an allowance teaches children about the look and feel of money and the relative value of each type of bill and coin. Familiarity with the various denominations of coins and bills can only come through the regular handling of money.
An allowance also offers counting lessons. A parent can show a very young child that 5 pennies equals a nickel and so forth. When visiting a store, a parent can point to a candy or toy and ask, “How many pennies would you need to buy this item?”
Having access to money also teaches money management in terms of pushing off immediate gratification in favor of saving up toward a more costly goal with greater value. Managing money offers a child a chance to make choices and learn through mistakes. Given a nickel, a child can choose whether to buy a single Tootsie Roll or save up for several weeks until he has enough to buy a special toy. The Tootsie Roll is gobbled up in a minute while the waiting can seem forever when one is saving up for something big.
The child may choose the Tootsie Roll and then experience regret. That’s a good thing. He’s learning a life lesson. He may do things differently the next time he gets his weekly nickel.
Here are 6 tips on the best way to offer your child an allowance:
Keep it tangible: Give small children their allowances in coins. If you want to give her five cents to start with, give her five pennies one week and a nickel the next. Show her that five pennies is the same as one nickel. Show her that if she would save her allowance for two weeks, she would have a dime, which is smaller, but worth more than a nickel.
Settle on a realistic amount: Deciding on the amount of the allowance can be tricky. Your child may tell you that her classmates are getting a larger allowance. How much should this sway you? The answer is not at all. You should look at your budget and at your child’s readiness to handle money and nothing else. Some parents increase the allowance for every year of age by a specific amount.
Give consistently: In order for children to learn about budgets and money management, it’s best to offer the allowance on the same day of the week, each week, and preferably at around the same time of day, for instance, Sunday morning.
Motivate toward goals: Talk to your child and find out what his heart desires. Talk about how much that item would cost. You can use the Internet to figure out costs. Then work out how long he would have to save his allowance in order to purchase the item in question.
You can discuss holding back only a portion of his allowance toward his goal and discuss how this would affect the timetable for the purchase while still giving him some spending leeway for the meantime. These discussions are valuable lessons in money management and in impulse control.
You can tell him about some of your own savings goals, for instance, you might put aside a certain amount of money toward leisure. In having this talk, you are transmitting your own values to your child and suggesting a reasonable course for saving and spending.
Bring them to the bank: Show your children the ins and outs of making a bank deposit. Standing in line, filling out forms, being courteous, it’s all part of the experience, all good. You might help your child open a savings account.
Don’t use an allowance to penalize: It’s best not to tie the allowance to specific chores, which should be done independent of the allowance. Nor should an allowance be withheld for a failure to perform household chores or for not doing homework. The purpose of the allowance is to teach your child about money. The purpose of chores is to teach responsibility and to contribute to the running of the household. Don’t confuse the two.
Avoid advances on allowance: If you give a child an advance on his allowance, you’re teaching him that not having money doesn’t mean he can’t get more. You’re teaching him he can buy now and pay later. It’s a good way for a child to get into debt and to learn to depend on credit to live beyond his means. In short—you’re teaching a bad habit. It’s better for him to run short and do without and learn from his shortsightedness.
On the other hand, there’s no need to be inflexible. Let’s say you visit a fair and your child sees something she’d like to buy. She has the money at home in her piggy bank, just not with her at the moment. You can loan her the cash. That’s about being kind and caring—about being family.
How do you feel about giving your child an allowance?