Some people give their kids an allowance and some don’t. If you’re among the roughly 50 percent of parents to offer a weekly dollar or two – or if you’re considering joining the group – today’s entry is for you. It’s packed with lessons to help you get the most educational bang for your child’s allowance buck.
WHY GIVE (AND HOW MUCH?) – Like I said, not every parent gives an allowance, but most experts agree that an allowance can be a great tool for teaching children about valuable money lessons, including how to save, budget and spend their money wisely. As for how much to give, 50 cents to one dollar for each year of your child’s age is a good rule of thumb.
START AT THE RIGHT AGE – The same experts mentioned above say five years is the earliest age to start an allowance (right around when kids begin to understand what money is and how it should be used). As for the “best” age. Probably around eight or nine, but that’s for the parent to decide based on their child.
WHAT IS THE ALLOWANCE FOR? – Most parents who don’t give allowances do so because they believe kids shouldn’t be paid for doing chores (i.e. things every member of the family is expected to do). That thinking is correct, allowances should not be linked to chores. They should be given as a learning tool only.
DRAFT AN AGREEMENT – Start with a document, much like a contract, that outlines all the important details: How much your child will receive, when they’ll receive it, and what the allowance is expected to be used for. Update the agreement as needed and don’t forget to have both parties sign it!
PAY REGULARLY AND PAY IN CASH – At the beginning of your allowance agreement with your child, determine how often he or she will be paid – weekly or bi-weekly – and make sure you stick to the schedule. Payment should also be made in cash, preferably several small bills or coins.
TEACH, TEACH, TEACH! – As we’ve already established, the allowances is a learning tool designed to teach kids valuable money lessons about saving, budgeting, spending and even donating to charity. Simply giving kids money won’t help them learn, so take time to discuss these lessons on a regular basis.
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