Why Giving an Allowance Might Work for Your Family
Should you give your kids an allowance? Some parents argue that kids shouldn’t have an allowance when they can find everything they need at home. There is some truth to that, but giving them pocket money can teach them the valuable skill of properly handling money.
Allowance is a simple concept. You give your kids a specific amount of money a week, sometimes in exchange for doing some chores or tasks around the house. The money they earn is for them to budget (and ideally save), which should teach them the value of money.
This is a good lesson to learn, but many parents are still doubtful about giving their kids an allowance for fear of losing parental authority. Teaching money skills, however, can take effort from already stressed parents.
Giving your kids an allowance has several benefits. Read on, and you can also learn some tips to teach your kids how to handle money without losing your authority as a parent.
What Does Giving an Allowance Teach Your Kid?
What lessons can your kid learn from handling money? There are two things they can learn from doing this: first is the value of money, and the second is how to make money decisions.
The Value of Money
Letting them handle and budget the money you give them teaches them the value of money and the importance of saving. It promotes a sense of responsibility and helps your kids become equipped with the skills to spend their hard-earned money sensibly. You can teach this skill to your children depending on how you structure the allowance.
The two most common structures are the no-free money and the dole-out approaches. Each has its benefits and drawbacks you should consider when deciding how to give your kids an allowance.
No Free Money
This approach involves giving your kids pocket money for completing their chores. With this method, kids are empowered to work hard, knowing the money they have is theirs. The downside, however, is that kids might decide not to do the chores instead, even if they won’t receive an allowance.
The Dole Out Approach
With this approach, you give your children allowance regularly without the need to complete any chores. You might give this to them to use however they want or have it spent in specific ways. Either way, this style can teach your kids to think carefully about how to spend their money. However, it may also convey that money is a gift and they don’t need to earn it.
Making Money Decisions
Budgeting is a skill that most adults are still learning, and it would help your kids learn the skill early on. Having an allowance means you can help them understand how to budget their money, especially the consequence of spending without much thinking, and possibly overspending a few times until they learn the balancing necessary for budgeting their allowance.
It’s up to you how to design the allowance to give your kids. It doesn’t have to be one way or the other. Think about what lesson you want them to learn and design the allowance based on this. Whatever style or design you adopt will have an impact on how your kids value money.
How Much Allowance Money Should You Give Your Kid?
So, you’ve decided to give your kids an allowance. Now the question is, “how much should you give?” The answer depends on what you expect your kids to buy with the money. It doesn’t have to be a lot if it’s only extra spending money. A younger child also doesn’t need a big allowance. If it’s for your kid’s day-to-day expenses, it should be a bit higher.
$1 per Year Old
A common rule is to give a $1 allowance for every year your kid has been alive. So, if you have a 7-year-old kid, then their allowance for the week is $7. Some parents think this amount of money is too much. In that case, you can consider other options.
Your Kid’s Expenses
What are the things your child will be spending on? It could be school lunches, birthday gifts, clothing, snacks, and so on. Make a list of the items and their costs to calculate the allowance to give your child.
The Same Amount Their Peers Get
If you are still unsure, you can ask the parents of your child’s friends, or you can ask them yourself. The amount they get can be a basis for how much more or less you should give your kids after considering their expenses.
When To Give Your Kids an Allowance
Research suggests that kids as early as age five can learn how to save money. At this age, teaching about money can already have an impact on your kids. The earlier you can teach them, the better. What if you have an older child? It’s never too late to teach them how to handle and budget their money.
Set Allowance Policies
To effectively teach your kids the value of money and how to budget and save, there need to be some allowance policies. By doing this, the family can also keep the money arguments to a minimum. Moreover, it’s an excellent strategy to make your children think about how to spend their funds.
Set Expectations and Stick to Them
From the beginning, set rules for the allowance and stick to them. If you promised to give them an allowance every week, you should give it even if your kids didn’t remember to ask. If you’re paying them for every chore completed, be sure to follow through.
Don’t Bail Your Kids Out
If your kids have already spent their money before the next pay, don’t just hand them money again. The point of an allowance is to teach them how to budget, and they won’t learn it if you simply give them advances.
Teach Them To Save
Require or encourage them to use part of their allowance to save. You can teach your children to save in a piggy bank, or you can open them a bank account. Every week, you can ask for a part of their funds to go into their savings account while the rest is theirs to spend the way they want.
Give Opportunities To Earn More
If you are paying them for the basic chores that are their responsibility, you can also allow them to earn more by creating an optional chore list. Apart from their regular tasks, they can also do optional chores, which teaches them that earning money is tied to work, effort, and initiative.
Make Sure Everything Is Done Right
By giving them an allowance, you also provide them with responsibility for their money, including making sure they get no more or less than what they should get. This way, they can learn honesty and know that they can create their own wealth.
Allowance Mistakes To Avoid
Giving an allowance to your kids may very well end up teaching them the opposite of the lessons you want to teach. Prevent this from happening by avoiding common mistakes.
Giving Them Too Much
The amount of allowance you give your kids can make them responsible spenders or entitled brats. You should give them just enough that their work is incentivized, and they learn the concept of making decisions to achieve their money goals.
Not Teaching Them To Be Responsible for Purchases
Don’t just make the allowance fun money for your kids. Let them know that now that they have an allowance, you won’t be paying for some of the things you bought for them before. These could be toys, art supplies, etc. Doing this should make them think carefully about where to spend their money.
Setting a Bad Example
Kids learn from their parents, so if you’re not sticking to a budget and if you’re spending beyond what you can afford, your kids will follow suit. There’s no point teaching them to budget with their allowance if they see you are not doing it yourself.
Not Talking About Money
Just giving your kids an allowance won’t be enough for them to learn how to handle money. It would help to talk to them about other aspects of money handling, such as having a savings account, debit cards, credit cards, food prices, etc, so they know where the money goes.
Conclusion
It’s understandable that some parents do not favor giving kids allowances, especially when it’s another time-consuming task. However, your kids will have a hard time managing their money if you teach them too late or let them figure it out on their own. Giving them an allowance and your guidance is essential in ensuring that your kids become financially responsible adults.
