Parents want to teach their children how to be smart financially, but it's hard to do so without trivializing money or the work it takes to earn it. Here are some tips on paying kids an appropriate allowance.
There's a lot of debate over the allowance question. Some parents pay a small allowance for chores, others give a larger allowance and allow children to pay for their own food and clothes. It all depends on your family dynamic. What everyone agrees on, however, is that it's important to introduce children to the concept of monetary value and budgeting so they can start good spending habits early. If you decide paying an allowance is an appropriate way of teaching these skills to your children, here are some tips to help you out. These are 3 parenting styles all parents should avoid.
Determine the right amount
Figuring out how much an allowance should be will depend on your family's financial circumstances and what things you want your child to be in charge of purchasing. Older children might be able to handle a larger amount which then allows them chances to decide when and where they'll eat for lunch, whether they really want to pay for the gas to get to that party on Saturday, and if they desperately need those $50 sneakers.
Alisa Weinstein, author of Earn It, Learn It: Teach Your Child the Value of Money, Work, and Time Well Spent, said financial experts tend to suggest one dollar for every year old a child is. You can choose how often these funds should be disbursed.
One goal of giving kids an allowance should be teaching them to save up for the things they really want. They can't do this if their allowance payments are irregular. Set up a schedule — the first and third Friday of each month, for instance — and sit down with your child to go over the previous two week's performance. Avoid handing them the money in an offhand moment because you're busy. Be intentional with the way they receive their money.
Help them learn to enjoy their work
CNN reported that tying money to household chores might not be the best idea because, "Children should be expected to help out around the house and in the yard because they are members of the family, not because they are paid," though exceptions might be made for special household tasks, like washing the car or mowing the lawn. Weinstein has suggested a creative alternative to this traditional method.
The idea is that you connect the allowance with tasks associated with a certain career path the child imagines they'd like to pursue. (Obviously, jobs like Princess or Video Game Player won't be conducive to this method, so it may have to wait until they're old enough to actually have an idea about their future.) Come up with activities that have to do with this field of work, including visiting places where this type of work is done, creating artwork depictions, making a brochure, or reading books on the topic then pay them appropriately for each activity.
The idea is to teach children that the aim of hard work shouldn't be the money, it should be the good feeling they get from successfully accomplishing a project.
Provide ways for them to save
You don't have to open a savings account for your child right away (though it's not a bad idea). But you should provide ways for them to differentiate between money to be saved and money to be spent. One simple way is to divide a shoe box in half with two holes cut in the lid. One side you might label, "Save" and the other, "Spend." When the child gets older, you can introduce more advanced topics like "Donate" and "Invest."
Be willing to negotiate
Parents get understandably annoyed when children approach them with requests for extra money or raises. It's one reason many avoid the topic of allowance altogether. However, Jayne Pearl, author of Kids and Money: Giving Them the Savvy to Succeed Financially, said, "Remember, allowance is supposed to be a teaching tool. Negotiation skills are an important part of that, which they're going to need for dealing with friends, teachers, and, eventually, their bosses."
Whether you teach your children about proper spending habits or not, they're going to learn them from somewhere, and it might end up being from a not-so-savvy source. They'll still make bad choices at some point, but it's better if you're there to help them learn from the experience when it happens.