Every parent eventually asks starts wondering if their child should get an allowance and if so – how much? Although many opinions exist, there seem to be no one magic plan that works for everyone. There are, however, some logical guidelines to follow when a parent realizes that an allowance is actually a money management learning tool.
What age is best?
When a child is starting to learn about the basics of money is probably the best way to start an allowance program. The child should be able to understand such concepts of four quarters equaling a dollar and recognize the different denominations of coins and bills.
How much?
The question of how much allowance a child should get should directly relate to how much you expect that child to pay for. The best way to determine the amount is to make a list of what the child might be responsible for. A younger child may simply wish to purchase a toy or two every once in awhile, but responsibilities can increase as the child becomes more independent. If an older child wishes to pick out his own clothes, he should get a higher allowance amount than an older child whose parent still pays for the clothes.
Chores?
By linking chores to an allowance, a parent is essentially teaching the child to ask “how much do I get?” every time he is asked to contribute to the house work. In the real world, parents do not get paid to do the dinner dishes or clean the windows in their own house, so why teach a child something that does not mirror reality? An allowance is useful as a teaching tool, so a parent should always keep in mind what lesson is being passed along.
Money management essentials
Too many young adults these days become inundated with credit card offers and have no idea of how to live within a budget. An allowance during childhood years is the best way to start these lessons.
Out of the allowance should come more than just spending for immediate fun. Teach a child how to save a portion of their allowance for bigger goals or an emergency. Teach a child how to contribute to society by tithing in church or contributing to a non-profit organization. Then, help the child evaluate the remainder (and don’t forget to add in sales tax!) to determine what can be purchased.
Allowances are a great way to teach children about how the real world works. By properly giving an allowance, a child not only has some fun money to buy toys, but is learning how to budget, live within that budget and become fiscally responsible adults.
