Rules for Giving Children Allowances
Tips on How to Help Kids Develop Money Management Skills
Apr 21, 2009
One of the most effective ways of raising money-smart kids is to give kids allowances when they are old enough to handle money. This can often commence when kids are in their teens and start making purchasing decisions.
However, parents do need to set rules on money for kids. Without parental guidance, money in teens’ hands will end up in the wrong place very quickly! Here are some useful tips on how to give children allowances so that they can acquire good personal budgeting and money management skills.
Decide what the Allowance Covers
Parents must be very clear about what the allowance covers. For instance, if the allowance is meant only for clothing and books, make sure it is only for clothing and books, not for gaming kits, cosmetics or alcohol. Decide also what sort of clothing and books can be used with the allowance, as some clothes and books may not be all that suitable for a teenager! Agree on these restrictions to avoid arguments on what can or cannot be used with the allowance.
Give the Child Separate Allowances
It’s also a good idea to give the child separate allowances for different kinds of items. That means she will get one amount for clothing, another for books, another for leisure, another for snacks and so on. It may be tiresome in the beginning, but it will teach a teenager how to allocate and spend money wisely. Later on, parents can combine all these allowances into one.
Begin with Small Allowances Regularly
Kids don’t usually know how to budget properly. If their parents give them one lump sum of money per month, they’ll probably use it all up by the end of the first week. So begin the exercise with small allowances regularly. For example, instead of giving the teenager $200 per month, try giving her $50 per week. As she gets older and shows signs of good money management skills, give her a bigger allowance to last the entire month.
Agree on What to Do with Left-over Allowance
Occasionally, the teenager may be wise enough not to spend all her allowance within the time period given. The best thing she can do is to save up this amount of money for future use. However, the child may want to use the money for items not originally intended with the allowance. Can she use the money for new cosmetics? Does she have to ask Mum or Dad about it first? Only her parents can set rules regarding this. So agree on what to do with left-over allowance.
What to Do if the Child Runs out of Money?
If the child runs out of money, do not bail her out without a condition. She won’t learn any money management skills if she knows Mum or Dad will help her out. But if helping her is the only solution, make sure she learns a lesson from this incident. A good way is to get a much cheaper, not so trendy-looking replacement (very useful when it comes to clothing and shoes) for her. The child will think twice before over-spending again.
Parents need to set rules regarding money for kids. They can help teenagers develop good money management skills by deciding what their allowances cover, giving them separate allowances, beginning with small allowances regularly and agreeing on what to do with left-over allowances. Make financial help conditional if the child runs out of money.
Found this article useful? Read also Ten Money-making Ideas for Kids and Money Management for Kids.
Reference:
Jay, Roni. The 10 Most Important Things you Can Do for your Children. London: Pearson Education Limited, 2008.
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