Top 10 Tips On Children's Allowances
Most kids don't get an allowance, but they should. A regular allowance helps children learn about money management and how to be smart consumers; it teaches twin values of saving and charitable giving, and it can de-stress the parent/child relationship. It can even, at the margin, cut down on the number of times your kids come at you with their palms extended.
Most parents believe in giving allowances but only about one in two actually dole out the dough. Those that do, give young children an average of about $5 a week, preteens between $7 and $10, and teens between $10 and $30 weekly.
The trick with allowances is not just distributing them but handing them out in a way so that they are useful. Here are some pointers for making the most of what you give your kids:
- Start at the right age. Some parents start their children on allowances at age 3. That's pretty young for someone to make buying decisions; most experts believe 5 is a good age to start and by 7 a child should be receiving some allowance.
- Don't link it to good behavior or homework completion. Neither should require payment. Don't withhold the allowance if a kid is rude or irresponsible, either; keep discipline separate from that regular allowance.
- Hand it out regularly, on a set schedule. For a very young child, once a week might even be too infrequent. For an older teen-ager, once a month is a nice interval to teach some money-management lessons. In between, the schedule typically is weekly. Hand it out, in cash, at roughly the same time every week.
- Think twice about linking that allowance to chores. The vast majority of parents believe that kids should earn their allowances with household chores, but there is another point of view: That kids should do chores because they belong to the family, and allowances are separate from that. Some parents require regular chores, like table setting and bed making, that are not tied to regular allowances, and offer extra chores, like lawn mowing or car washing, that their kids can do for extra money.
- Talk to your kids about the three things they can do with their money: save it, spend it or give it away. They should do some of each with every allowance payment. You can help them by giving them separate banks or jars for their savings, weekly spending money and charity money. A younger child could start saving for something that's just a few weeks off; an older child could have a bigger, more long-term target in mind.
- As the child gets older, you can add more frills to the concept of saving: You can help them set up a mutual fund or bank account. They can earmark a different amount of savings for different savings targets; for example; $2 a week for a skateboard; $1.50 a week for their own phone; $1.50 for the ol' college fund.
- Let your child blow the money. The whole point of allowance is to help your child learn money management, and they won't do that if you always bail them out.
- Decide whether to lend them money. The day will come when they come to you, sad eyed, because all their friends are going to the movies and they spent their last dime on their first day. You can be hard about it, and make them stay home. Or you can lend them an advance against their next allowance. If you decide to do that, use it as a teaching opportunity, too: Either set up a payback schedule that they must stick with, or subtract it from their next allowance payment, and give them an accounting, so they understand why they are getting less. Don't let them get more than one allowance in the hole.
- Add responsibility gradually as they get older. Middle-school kids can handle a lunch allowance: If they brown-bag it, they can pocket the extra money. It doesn't take long before they figure out that they can save some cash by buying a package of juice boxes instead of buying a drink every day at school. An older child can take over buying more and more of their clothing, but don't do it all at once. Start by giving them enough money to pay for a school year's worth of shoes, for example. Or a fall sweater budget that they can spend as they wish.
Don't criticize their spending decisions, but be available to teach about good shopping habits, credit, saving and investing. Money is the one subject about which kids are willing to listen to their parents. How can you pass that up?