How To Give Your Child An Allowance
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A few weeks ago, I wrote a quick 3 part series about how to teach your children about money. Teaching money management is probably one of the most important legacies you can prepare for your children. Making a budget, saving money and avoiding credit abuse are fundamentals that everyone should be aware of, especially our youth. One of the first tools you can use to teach your children about money is by giving them an allowance. However, there are certain rules to apply if you want your children to benefit from this experience.
Rule #1; present the allowance as a privilege
Money is not a given, it has to be earned. This is true at any age. If you give your child an allowance, he should know that it is not automatic. It is important to explain why he receives this allowance (keeping his room tidy, washing the dishes, etc.) and that not everybody receives one.
No matter the amount, the value of working and earning an income is more important than the allowance itself. On the other hand, I think that by telling your kids why they receive their allowance, it makes it easier to explain when they don’t do their chores.
Rule #2; no cash advances
Our children will learn faster than we expect to live off credit. And the first lender they will approach is the “Mom & Dad Bank; founded since your date of birth”. So don’t play the payday loan or cash advance service with your children. If they need more money to buy something, they will have to wait until it’s payday before cashing their allowance.
Rule #3; money is not everything
I am a big advocate of making more money year after year. But I don’t really believe in the almighty back; I like what it can give me access to; special moments, treats, comfort and security. As you will always find someone doing your job with a better pay check than yours, your son will surely find one of his friends making a bigger allowance (and maybe doing less work that he does!).
I don’t think the amount of the allowance matters. However, it will to your kid! This is why I will try to spend time with my son and explain that he does help us and we appreciate it. I will also tell him that it is the maximum amount I can give him right now and that we all have to learn to live with this amount; this is called budgeting ;-)
Rule #4; when should we give the first allowance?
This is always a big question. I am currently asking this question as my son will turn 5 this year and will start school this autumn. I didn’t talk about this with my wife yet but I think I will start when he enters school.
Receiving an allowance is also a milestone in a child’s life. This is living proof that he is growing and that he can become more responsible. Since he will start school, I think it would be a good way to show him that going to school is like going to work.
I don’t expect to give him much at first, especially since I want to start at such a young age. Probably $1 or $2 a week. Just so he can start calculating how much he makes per month and realize that he can go to the dollar store to buy a toy at the end of the month. It won’t really affect my budget and we will start a great money lesson.
Your take: How do you manage allowances?
As a young parent, I am not exactly quite sure how/when to give child allowance. What is your experience with kids and money?
Image source: yup that is my 2 kids ;-)