Home is the best place for kids to learn about money
Giving your children an allowance will give them an opportunity to learn how to manage their money while the cost is minimal.
But when do you start giving an allowance, how often and how much do you give, and should receiving an allowance be tied to completing chores?
Every family is different, and there are no right or wrong answers to these questions, but here are some things to think about when deciding what will work for you.
Around 3 years old, children are eager to learn about money, and by 5 years old they are willing to save their money for a short amount of time. At a very young age, children will start to see that money has power, but it will take time for them to understand just how much value money has. A good time to start giving an allowance is when your child is able to understand the concept of money: the idea that money is exchanged for merchandise. The more experience they have with money the faster they will understand.
Time is long when you are young. You should plan on giving an allowance at least once a week. You can stretch that out further as children get older. But, whenever you decide to pay them, stick to it. Be dependable, just like your pay check, and show them you can honor your obligations. Figure out the logistics, like when they will get a "raise" just like a business deal.
Some people will say that a dollar for each year of their age is appropriate. Others will ask friends how much they give and match it. If you don't like either of those ideas, you can figure out a good number by comparing two things.
First, measure how much you already give them. You'll probably find that giving them an allowance will be cheaper for you than the incidentals that you already pay for.
Next, decide what you expect them to pay for when they do get an allowance. Consider spending, (toys, candy, clothing, entertainment) saving, (for when they want something that costs more than their weekly allowance) and sharing (church, charitable organizations, and gifts for friends and family).
Should allowance be tied to chores?
Everyone has responsibilities as members of the family that shouldn't have to be rewarded with money. Children can develop a sense of entitlement when they are receiving something for nothing. Maybe the answer is somewhere in the middle. They receive an allowance, certain personal and household chores are expected, but they have the option of working harder for the extra things that they want.
Probably one of the hardest things to do when you give an allowance is to let it go. When you give your kids an allowance, it’s not your money anymore. You can give them helpful advice on how to spend it more productively or what purchases to avoid, but in the end, you have to remember that this is their time to learn how to manage their money. Yes, they will make mistakes, but it is so much better to let them learn from their own successes and failures.
When, how often, and how much allowance to pay can be a puzzle. But one thing is certain — the best place for kids to learn about money is at home.
Gregg Murset is the founder & CEO of www.myjobchart.com. He is a father of six and a certified financial planner. He's on a mission to educate kids about work, responsibility and learning the value of a dollar in a technologically engaging way.