“Can I have that, pllllleeeeeasssse?” As a parent, how often have we heard that familiar phrase? If you don’t have kids, I’m sure you remember a time you berated your parents for a prized possession. At times we may give in, and other times we brace for the tantrum that is sure to follow the word, “No.”
Whether your child is 17 or 2, chances are they’ve asked you to buy them things. Giving in to all those wants can set you up for financial disaster, and teach your children the wrong message about money.
What’s a parent to do? Give them an allowance, of course!
Once the word allowance enters your mind there are several questions that follow:
- Should the allowance be given freely OR tied to chores?
- Should I only pay for extra chores?
- How much money should I give my kid?
- Should I let them spend it on what they want OR should I force them to save a portion of it?
- Coins, bills, or a savings account?
- How often should I give him/her allowance?
There are various approaches to giving an allowance. Some parents believe every child should do basic chores without pay (making the bed, clearing the table after dinner, etc.) and offer extra chores for pay.
Other families give an allowance weekly, or monthly that is not tied to chores. It’s meant to be a tool to teach money management.
Still others will use a combination of both. Sticker charts, checklists, and to do lists are becoming a more popular option as well.
What approach should you use? There is no one right answer. It’s just what works for you and your child(ren). You may even need a trial period to see if your ideas work with your kids.
Basics of Allowances
The important thing here is to put actual money into your kid’s hands and to teach them how budgeting works. Many adults carry baggage about money, and most often it stems from lessons we learned as children. Most often these are unintentional messages that our parent’s sent about how they felt about money. By showing them how to mange money now you may very well help your kids avoid money mistakes that so many young people make.
Opening up to your kids about working, money, and your bad habits is key. For instance, when you go grocery shopping you take a list, if the kids tag along have them be responsible for a portion of the list. Perhaps cereal is on the list. Show your child the prices and give them a number you want to spend, and let them choose. Or maybe you need milk. Point out the difference in price between a half-gallon and a gallon, and why you choose the size you get.
How much should I give my child? And how frequently?
Many families give a small amount a week, and increase it as their child gets older. By the time your child is a teen, they should be able to handle their back to school spending, and a monthly budget.
Typically it is best to pay a young child weekly, or every other week, and an older child should get used to being paid on a monthly schedule.
Where should my child keep their money?
When they are very young you can encourage them to save their change in a piggy bank or change jar, and to give their coins as donations to church or to charity. Dollars can be kept in a wallet, or in the mom or dad’s wallet for safekeeping.
Around age 8 or so most kids are ready to set up a savings account. Choose a bank you can walk into, so your child gets the experience of handing over their money, and figuring out how a bank works. You can save money automatically for them, and take half of the cash they might receive on birthdays and at holidays into their savings account. Setting up an agreed upon percentage is a great way to make sure that they’re saving. For instance with my oldest son we had him save all his salary from his summer job while all his tips was spending money.
Many banks offer incentives for young children to sign up for savings accounts to get them started with $10 or $20.
What Our Family Does
We pay our kids bi-weekly an amount equal to their age. We used to take them shopping on payday, but quickly learned by doing so we were teaching them to spend every dime. The kids use wallets to hold their cash, and take them along when we go out, but now we track their money and give them cash when they need it. They end up saving more this way.
Our oldest also has a SpendSmart pre-paid debit card that we automatically put half his monthly allowance into. The other half goes directly to his savings account. This allows him to spend freely, we can track it via text message or email, and he can never overdraw his account.
We do not pay our kids based on chores. Chores are an expected part of life, and since mom and dad don’t get paid for chores neither do the kids. I will pay extra for chores that are outside the norm. A quarter for picking up a bucket of pinecones, $1/bag for the older kids to rack up leaves and put them in a bag, etc.
We also have a family change jar. The family change jar helped us pay for a swingset, pay for a (small) portion of our DisneyWorld trip, and more. Everyone is motivated since we all benefit from the savings.
The kids are responsible for a budget when shopping. For instance when the kids go back to school they get a set budget to spend on supplies and clothing.
No matter what you choose to do teaching your kids to be responsible and understand money is a valuable life skill, and they will quickly learn they can’t ‘rob’ your money since they have their own to spend.
What about your family, how do you deal with allowances? Do you use an allowance as a springboard for talking to kids about money?