An allowance can be a great way to teach kids money management
skills. With an allowance, your child can learn how to make
decisions, deal with limited resources, and understand the benefits
of saving and charitable giving.
There's no single correct way to handle allowance. As you
decide when to start, how much to give, and whether you want to
link the allowance to chores, it's important to make choices
that fit your family.
Starting an Allowance
No particular age is best for every kid, but consider
starting an allowance by the time a child is 10 years old. By then,
most kids have had experience making thoughtful spending
decisions but still look to parents for guidance.
How much allowance should you give? It's depends on your
financial situation and what kind of commitment you feel that you
can comfortably keep. Experts generally recommend that kids get 50
cents to $1 per week for every year of their age - $3.50 to $7 for
a 7-year-old, for example.
Regardless of how much you choose, give the allowance regularly
and increase the amount as your child gets older.
Allowance and Chores
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.
Ultimately, you must decide what works best for you. Whatever
you decide, be sure that all parties understand the
arrangement.
If you give an allowance for doing housework, make sure that
your kids understand what their responsibilities are and the
consequences of not doing them. You might want to involve them in
choosing the chores, and then keep a chart posted to remind them
what needs to be done.
It's important to be consistent. Following through on your
promise to give a regular allowance sets a good example for
your kids and is incentive for them to honor their end of the
bargain. If you don't keep up with the allowance, they
might lose that incentive and stop doing the chores.
Using an Allowance
How should kids spend their allowance? It's a good to have
them use it for discretionary things, not essential purchases such
as food or clothing. This lets kids make buying decisions -
and mistakes - without dire consequences.
You may want to encourage kids to put away a portion for charity
and another portion for savings. If so, let them choose where to
donate the money. It may be a cause that a child can relate to in
some way, like an animal shelter or a group that helps sick
kids.
If some of the allowance goes 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, even if the mail is a
bank statement.
Beyond Allowance
Once kids become teenagers, you may want to provide a quarterly
clothing allowance in addition to the weekly allowance.
If you do, establish a reasonable budget and allow your kids to
spend it as they wish - but also to honor its limits. If your son
chooses to buy a $95 shirt or your daughter opts for a pricey
handbag, for example, they might have to make compromises on
other clothing choices.
Reviewed by:
Steven Dowshen, MD
Date reviewed: August 2008
Note: All information is for educational purposes only. For specific medical advice,
diagnoses, and treatment, consult your doctor.
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