Has your child finally reached the milestone to start receiving an allowance? Are you wondering what the norms are surrounding an allowance? What age should you start? How much should you give and how often?
“Kids who get an allowance tend to be more financially savvy than those who don’t. They score higher in a testof pricing knowledge, and they are less likely to mistake credit as a limitless form of currency.” – Time Magazine
Allowance is a very important building block in your child’s development and introduction into money management. Not only does it slowly teach them financial responsibility, but also let’s them learn the value of a dollar, that “money doesn’t grow on trees” and if they want something, it might require them to save.
The best time to start an allowance with your child is around the time they reach first grade (6-7 years old). This is a great age to use their allowance as a learning tool: counting, adding and subtracting. Most kids are visual learners, so try and arrange for their allowance to be in cash. Your child will be able to visibly see how much they have, are saving and spending.
Once your child reaches middle school or high school, it might be easier to transition their weekly or monthly allowance to a pre-paid or debit card. Apps like: FamZoo, Allowance Manager and Money Rooster are available to help manage multiple accounts; they feature alerts, auto pay and have functions to freeze cards (if lost) and peek at what your kids are spending their money on.
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When it comes to how much and when; this, of course, is up to you as a parent, your budget and what you can afford. On average, a child gets $1.00 per year, for example a 5 year old would get $5.00 dollars per week and would be raised on each birthday.
Make sure it is clear to your child what their allowance is for. Let them know you as parents will pay for the necessities like: school supplies, clothes and food, but their allowance is for extra things like: sweets, toys or video games, etc. Make sure they’re receiving enough money to buy a few things they would want per month. The amount should grow as they get older, as well as their financial responsibility. By the time they finish high school you want them to be able to be financially independent, ready for college and able to handle a budget.
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Make a routine and stick with it! Will your child be paid weekly or monthly? Once you pick a day, make sure you’re committed to it. For smaller children, set reminders to make sure you have the correct change to distribute weekly. This system will help your child learn how to budget and that they can’t come to you for money whenever they want something. It may need to wait till they get their allowance next Friday.
Books like “Giving” or “The Opposite of Spoiled” can help you as parents encourage your child to do more with their money other then spend it. Teach them to split their money 3 different ways: Spend, Save and Give. “Most of us try to keep some money aside for spending on money on things that make us happy, save money for things in the near to long time future, and we hope to have a little bit leftover for people who have less than we do.”– Real Simple. Of course you can encourage your children to spend their money on things they want, but they can also save it for a rainy day or give back to a charity they are inspired by. Maybe you have a child that has a soft spot for dogs and they can give a portion of their money to a local dog shelter.
Do’s and Don’ts of Allowance:
- Don’t tie your child’s allowance to weekly chores. Chores and household responsibilities are about being a part of the family, where everyone pitches in and not for a weekly allowance.
- Teach your kids how to budget or about budgeting concepts.
- Let your kids make mistakes! If they want to spend all their money on candy and have none left for the new video game they’ve been wanting. It’s their lesson to learn.
- Know your child. Different kids have difference impulse controls and levels of responsibility.
- Give kids an opportunity to make extra money outside of their allowance. For example: a summer job, babysitting for neighbors or washing your car.
“By giving allowance, you are empowering him to make the decisions about how that money gets spent. You might decide that this is too much discretion for your 10-year-old. But for some kids, it’s a perfect way to see what it’s like to run out of money and not be able to buy what he wants. And that’s where rule number two, consistency, becomes really important.” – PBS