As a young child, I got an allowance and spent it unwisely buying my “friends” penny candy and comic books. I found out my “friends” were gone as soon as my money was. Lesson learned.
Allowances are powerful things. Children should be allowed to make unwise purchases, because we all learn from our mistakes. Allowances are most children’s first exposure to the power of personal choice that financial means can bring. It is for this very reason that parents may approach it with fear. Children need to understand the value of money, and will only learn this when they have their own money. Receiving an allowance can teach children the basics of how to be responsible and self-reliant.
Children need the opportunity to spend and save their own money. As I got older and stopped receiving an allowance I went to work. I worked at a stable and then on a chicken farm. I learned that I needed to work for my money and not to be dependent on my parents for everything. I remember buying my first car at 16. I didn’t need any help paying for it. I also had to pay for all my car expenses myself like gas and insurance. I learned true money management this way. Children will learn how to make a budget and spend accordingly. As parents we may be responsible for the basics, but kids who earn money should become responsible for the frills.
Let me tell you how we used to do it. My kids grew up in the era where your popularity depended partially on whose name was embroidered on the seat of your jeans. I believed we, as parents, were responsible to buy them jeans but I balked at paying for a designer name. My girls were working at the time so I proposed the following. I would give them the price of a reasonably priced pair of generic jeans. If they wanted designer jeans, they paid the difference. They quickly decided the designer jeans just weren’t worth the extra money and got the jeans I gave them the money for. I did something else with my children to measure how they were learning fiscal responsibility. I gave them all ten dollars with the stipulation they had to spend it on something totally impractical. At the end of a week they had to give it back if they didn’t spend it. My oldest daughter had to return the money because she just couldn’t spent it foolishly. I was so proud.
You are not going to kill your kids by teaching them how to be responsible with money. Our job as parents is to prepare our kids for adulthood. You won’t rob them of their childhood and you’ll teach them lifetime lessons that our school system does not. By giving them an allowance you will teach the concept of budgeting, how to avoid unnecessary purchases, how to save towards a bigger goal, teach them responsibility and give them independence. An allowance can be a great way to teach kids money management skills and help them learn how to make decisions, deal with limited funds, and understand the benefit of saving. There’s no single correct way to handle giving an allowance. Deciding when to start, how much to give, and whether you want to link the allowance to chores are choices that should fit your family.
No set age is best for every kid, but consider starting an allowance by the time a child is by 10 years old at the latest. By then, most kids have had experience making thoughtful spending decisions but still look to parents for guidance. Regardless of how much you choose, give the allowance regularly and increase the amount as your child gets older. Should an allowance be tied to chores? Again, it’s a personal choice. Some experts think that it’s important to make this connection so that kids learn the relationship between work and pay. Others say that kids should have a responsibility to help with housework, above and beyond any financial incentive. In the end, you must decide what works best for you.
Whatever you decide, be sure that all parties understand the arrangement. If some of the allowance is to go to savings, consider setting up an account at a local bank. This way, your child can keep track of the money. Many banks offer special bank accounts for kids, and yours may enjoy the experience of getting mail and seeing their money grow.