6 Steps To Raise Financially Responsible Children: Step 2

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Income

Children can acquire income in a variety of ways: allowance, jobs, gifts, etc. However, allowance in particular, remains one of the most useful teaching tools for parents.

What is an allowance?
Typically allowance is money given to a child for activities they perform. These activities are normally outside of household daily maintenance that family members are expected to perform to keep the house running smoothly. Children are often expected to keep their rooms clean and do a few extra chores without being paid. Activities that go outside this realm may fall into the allowance category. Raking the leaves in the yard, watering the plants, and washing the bathtub could be included as chores required for allowance. Parents and children together should discuss what jobs the child must perform in order to receive an allowance.

Expectations of Allowance

Parents often start a child’s allowance at 6-7 years of age. However, some children may be ready as young as 4-5 years old. You need to make sure they are conscious of what money is used for and why they are receiving it, in order for the lessons of allowance to have a meaningful impact.

The amount of money you decide to give to your child for allowance is your unique decision. Financial advisors have recommended $1 times the age of the child, per week. In this scenario, a ten year old child would receive $10 per week.

The day of the week to pay allowance is up to your discretion. Some parents find that paying allowance on Friday makes the most sense since this is when most adults receive their paychecks. Other parents have learned through trial and error that paying allowance on Monday is more appropriate for their child. What they discovered is that if they paid their child’s allowance on Friday, they would spend it entirely on Saturday and have nothing left for the rest of the week. Switching pay-day to Monday resolved this.

What ever day you choose, make sure that you are consistent with payment. You want to set a standard, that as long as your child does the agreed upon chores, she will be paid her allowance. Some parents withhold allowance if their child has not completed her chores. You should, however, explain to your child that in the real world if an employee does not do her job she does not get paid.

The goal of allowance is to help children understand that work must be performed in order to receive payment – just like in the real world. Allowance will help teach children responsibility. It also will help alleviate the constant need of children to ask for money from their parents for every little thing that they want, such as a pack of game or a small toy.

Any allowance strategy should strive to teach kids about financial responsibility. Ultimately, a key aspect of a successful allowance program is managing the challenges along the way, changing strategies when things are not working, and overall, doing what is right for your family.

 
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