Youth & Money
Give Your kids Their Own Spending Power
Since most of us learn by doing, an allowance can give your child the chance to learn about handling money, while the stakes are still pretty small. Financial advisors point out that having a regular amount of their own income is the only way kids can learn to manage money. They also say that the purpose of an allowance is to give your children the opportunity to learn how to manage money through their own successes and failures with the input of their parents.
Allowances can still be a tricky subject: how much, how often, and for what? Ultimately those decisions are yours, but following are some guidelines that may help. Most experts agree kids can handle an allowance by age seven or so, though some children start receiving an allowance in kindergarten. Only you can really determine whether your child is ready for an allowance. When he or she is, though, it's best to sit down with them and explain what that responsibility means.
Average weekly allowance from survey of 1000 children
- Ages 8-9: $3.74
- Ages 10-11: $5.19
- Ages 12-13: $6.66
- Age 14: $9.45
- Source: Zillions magazine by Consumer Reports, January 1999
When deciding how much allowance to give, you'll want to be sure you both understand what the allowance must cover. School lunches? Snacks? Computer games? Extracurricular activities? For older kids you may want to add clothing or other bigger ticket items to the list. Write it down so there is no "confusion" later!
Chores or no chores? Many parents have strong views about whether allowances should be tied to chores. Some parents won't pay an allowance unless the weekly chores are done. Others view chores as something kids should do as part of a family, and not something for which they should be paid. It's up to you, but whatever you decide make sure you have realistic expectations about what they can handle, and that you are consistent.
General allowance guidelines that most experts agree upon:
- Be reliable and pay the allowance at a set time each week. (Otherwise you'll forget
and the kids will start telling you that you owe them a small fortune!)
- Require them to get in the savings habit by having them set aside a portion of
their allowance in a safe place as a savings account. You may also want to have
them set aside a portion for charity or other types of sharing (gifts for others,
for example).
- Don't hold back an allowance as punishment. Find other ways to discipline your
kids.
- When they are older, consider paying interest on their savings to teach them the
value of compound interest.
- Require them to spend their money for some of their "needs" as well as their "wants."
You may make them pitch in on a new set of sneakers, for example, or even buy a
pair themselves if they are old enough.
- Give them a safe place to store their allowance, whether it's a piggybank or a
cash box with a key.
- Keep your two cents to yourself. Kids need to be able to learn to make their own
choices - and mistakes - with money. Your guidelines always apply, but as long as
your child's choices don't violate your families' values or rules for safety, allow
them some leeway.
- Pay their allowance in denominations small enough to allow them to immediately
set aside some for savings or giving.
- Set a specific amount you're willing to spend on birthday gifts for their friends.
Let your child make up the difference if they want to buy something more expensive.
