The Allowance Question
Most parents have the same questions: Should we give our kids an allowance? If so, how and how much?
For the most part, children don't have the same understanding of money that adults do. One trip to the supermarket can turn into a nightmare when a child fails to understand why they can't have the candy that they desire so much. And the cookies. And this bag of chips. Oh and what about this? A simple ten dollar bill can make a child feel like Donald Trump.
While giving kids allowance is a great way to teach them about money, it's not without its problems. It can help them as much as it can harm them if not done correctly. The following are tips to responsibly provide an allowance to constructively teach children about money.
The Chores Debate
Central to any discussion about providing an allowance is the concept of chores. Should an allowance be paid dependent upon completion of chores? Most parents see two large benefits to chores. Firstly, it teaches responsibility. Outside of school, it can often seem that kids don't have to do anything. Chores give them a task that is theirs alone to complete.
Secondly, many have made the argument that chore-based allowances will teach children the value of money. It helps them understand that we need to work for money and that it isn't free. In turn, it can help them appreciate the value of their purchase and teach them the meaning of opportunity cost. You can't always have everything you want, but after working for their purchase, they will enjoy it even more.
Budgeting and Math Skills
Allowance will also help children develop budgeting and math skills as they save and plan for how to use their money. Once you notice that your child is beginning to grasp the concept of numbers and is developing rudimentary math skills, it might be high time to start providing them with an allowance. However, note that children develop mentally at different rates, and there is no 'one-age-fits-all' period that automatically qualifies a child for allowance. Use your own judgement and discretion.
Use of Allowance
Try not to keep unreasonably high expectations for your children after you start giving them an allowance. Though many parents would like to see their children save their allowance, this doesn't always happen—and that's ok. It's a learning experience. If your child blows their entire allowance on a video game or toy, don't get angry with them. Instead, try to teach them how to save money and learn more moving forward.
One idea to help? Split their allowance in two, or match their allowance with money in a separate jar for savings. There may be some pouting over why they can't have the money “noooooow” but it will provide valuable conversation and lessons on the ideas of saving for the future.
How Much Should I Give Them?
This is a tough question that depends on a lot of factors such as household income, the age of your child, and how much you trust them. If it is your intent to teach your child about the value of money and encourage responsible spending habits, even small amounts will suffice.
In the end, an allowance is a great way to promote financial and mathematical development for your children or grandchildren. It will also help them understand why they can't have the candy or toy they want—even when they scream at the top of their lungs.