When you were a child, did you look forward to the day when your parents would give you your allowance?
Did you enjoy the feeling of those crisp, new bills in your pocket and the freedom of knowing you could do whatever you wanted with them? Did you spend them all at once? Or did you save some up for a rainy day?
Over the years, parenting trends have come and gone but the concept of parents giving their children allowance is one that has stayed strong to this day. It’s a great way to teach children how to be responsible with their money.
The Reasoning Behind the Allowance
Parents can give their children allowance for different reasons. Some parents will give their children a set amount each week. This is a system called pure allowance.
In a pure allowance system, children are not expected to do chores to earn their allowance. However, the amount of money they get is not contingent on the chores they do. Some parents prefer this system because it makes children see chores as more of a mutual obligation between themselves and their family members and they do not count on an outside motivator to inspire them.
Some parents give their children allowance based on the chores they do, and no chores means no mula. In this chore-based system, children learn they need to work to make money and they learn about choices and consequences. However, some argues that it also gives them the choice not to do chores and establishes a system where children are rewarded for performing tasks they should be performing anyway.
Other parents choose a hybrid method which is to give their children a set amount of money but give them extra if they go above and beyond in the chores they do. This provides parents with an enforceable way to give their children allowance, setting clear expectations while giving them an opportunity to learn about financial responsibility.
There are different schools of thought involving the giving of allowance and the reasoning behind it, and that is okay. The main goal of giving allowance should be teaching children financial responsibility and this will be achieved regardless of what approach parents take.
- Pure allowance
- Chore-based allowance
- Hybrid allowance methods
Tip #1: Communicate with Your Kids About Their Allowance
No matter how you choose to give your child allowance and what reasoning you use, it’s important that your children understand why they are getting an allowance. Parents should communicate with their children to make it clear that they are being taught financial responsibility. They also should be given advice about making wise purchases.
Tip #2: Come up With an Amount
It’s a good idea to set an amount when structuring your child’s allowance program. Here again, different schools of thought come into play.
Some parents will give their children money to cover their necessities only. These children may be given extra money for entertainment purposes if they go above and beyond in the chores they do around the house.
If this is the case, parents should give their children fairly large allowances to cover their basic expenses and determine how much they will be giving towards entertainment purposes on a case by case basis.
In other households, parents may cover their child’s necessities and give them extra money for pleasure and entertainment.
If this is how you structure your allowance, careful consideration must be used to come up with an amount you think is reasonable.
Your child’s age may also be a factor in the amount of allowance you give them. Younger children will not have as many needs and they may not be ready to take on the responsibility of handling larger amounts of money.
You may want to give your younger children just a couple of dollars a week to give them some experience with handling money.
Some experts advise giving children a dollar for each year they have been on the earth… so a five year old will get $5, a six year old will get $6 and so on.
Tip #3: Create a Budgeting System
It’s important to teach your children the importance of saving money. Therefore, you should set up a system where children can put aside some money for spending and some for saving. One way to do this is to set up jars where money can be stored for different purposes.
As children get older, you can open savings and checking accounts for them.
This will teach them that money isn’t only for spending; it’s for saving as well.
You can recommend the amount of money your child puts in each bucket, or account, but it’s also important to let them make mistakes when it comes to the spending of their money. If your child spends all their money on something frivolous, they may cry and beg for more money later in the week.
We all know how parents have a weak spot when it comes to their children’s tears but staying strong on refusing to give them more money will teach them a valuable life lesson.
Tip #4: Routinize Your Payments
It will be easier for children to learn how to budget their money if they are given a set amount on a certain day of the week or month.
Although modern technology has made transferring money easy, it is best to give young children actual dollar bills. The giving and receiving of tangible objects will enforce the reality of getting money and spending it which will establish a healthy money mindset.
When children are older, you can start familiarizing them with the wonderful world of online banking. Parents can use technology to have allowances automatically transferred into their children’s account. It is a good idea to set up text alerts to let children know when money has transferred to make the receipt of their allowance a bit more realistic.
A Final Word on Allowance...
Parents take different approaches in the way they structure their children’s allowance programs and there is really no wrong or right way to do it. The important thing is to remember that when you’re giving your child an allowance, you’re doing more than just giving them money, you are teaching them financial responsibility. And that is a valuable lesson that will come in handy throughout their lives.