Giving Your Child An Allowance

As a parent, the subject of giving your child an allowance can evoke strong feelings. Parents may feel strongly in favor of giving an allowance, believing that this teaches children money management. On the other hand, you may be strongly against giving your child an allowance for fear of creating in them, a sense of entitlement.

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. Should chores or responsibilities be tied to allowance-giving? At what age should children be given an allowance? Most of all in giving your child an allowance, you might wonder how much allowance is appropriate for their 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.

Counting Lessons

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 they have 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. They are learning a life lesson. The next time the child gets their weekly nickel, they may do things differently.

Six Tips on Giving Your Child an Allowance

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 them five cents to start with, give them five pennies one week and a nickel the next. Show them that five pennies is the same as one nickel. Go one to explain that if she would save her allowance for two weeks, she would have a dime, which is smaller in size, 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 their 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.

Research Costs Online

Motivate toward goals: Talk to your child and find out what their heart desires. Discuss how much the item would cost. Go online to research costs. Then work out how long they would have to save their allowance in order to purchase the item in question.

You can discuss holding back only a portion of their allowance toward the goal and discuss how this would affect the timetable for the purchase while still offering some spending leeway for the meantime. When it comes to giving your child an allowance, these discussions are valuable lessons in money management and in impulse control.

You can tell your child about some of your own savings goals. For example, 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 Withhold An Allowance

Don’t use an allowance to penalize: It’s best not to tie the allowance to specific chores, which should be done independently 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 teaches the child to get into debt and depend on credit to live beyond their means. In short—you’re teaching them a bad habit. It’s better for them to run short and do without and learn from their shortsightedness.

But there’s no need to be inflexible. Let’s say you visit a fair and your child sees something they’d like to buy. They have the money at home in their piggy bank, just not with them at the moment. You can loan them the cash. That’s about being kind and caring—about being family.

How do you feel about giving your child an allowance?