When Should Kids Start Getting Allowance?
If your children are always 'wanting' without a concept of the cost, let them manage their own money. Here are three tips to help parents get started.
Gina Mancini figures she spent more than $300 in one week last summer on event tickets, museum entry and souvenirs and other ticky-tack things her son, Mason, just had to have.
"When I added it up, I just couldn't believe it," says the Saline mom. "It just really hit home that he had to learn that we don't have an unending supply of money."
One of the best ways to teach children about money is to let them actually use it. An allowance gives kids their own money and lets them to make choices – and mistakes – that will ultimately teach them how to handle their own finances.
Most experts say you can start giving an allowance to a child as young as age 6, although parents should make that decision based on the individual child. Here's how to set up an allowance system that will work for your family.
1. Consider goals
We all want our children to grow up able to earn and manage their own money. Some parents have additional financial values they wish to instill, such as saving for a rainy day or giving money to charity. All of these values are easily incorporated into an allowance system. One popular and simple way is to give your child three different banks, marked "save," "spend," and "give."
Every week, your child will divide his allowance among the banks. For very young children, simplicity is best. Give them an amount that is easily divisible by three, and have them divide their money equally among the three banks. Give allowance in cash, since it's more concrete for young children, and consider giving it in quarters if you're dealing with small amounts. For example, if your 6-year-old child receives a $1.50 allowance, give him six quarters and tell him to deposit two quarters into each bank.
2. Choose an amount
Before you can pick a dollar figure, think about what your child will need to spend his money on. One of the most important parts of an allowance system is giving your child responsibility along with money. Let your child know he will be receiving an allowance, but will also be expected to spend his own money for certain things.
Young children can be responsible for buying their own souvenirs or snacks when the family is out for the day. Older children can pay for more things, such as birthday presents for friends, music or games, and even their own clothes. Of course, how much you give for allowance will depend on what you expect your child to buy with his allowance. Make sure you're giving enough, so he can buy everything he needs, but not too much, so he's not forced to make some financial choices.
3. Set guidelines
The goal is to let your child spend money on things he wants – and to occasionally let him make his own mistakes with his allowance. Most experts advise against tying allowance to household chores, saying it's best to cultivate responsibility to the family without attaching financial strings. Let your child's allowance be his own money, regardless of other factors.
However, it's fine to set some guidelines for what he can and can't buy with his allowance. If you don't allow certain toys in the house, for example, let him know up front that he still can't buy them with his own money.
Now that you've made all the important decisions, it's time to start the allowance system. Watch for opportunities to talk about money with your kids and why you choose to spend money the way you do. Talk with them about their own spending habits and savings goals. Fine-tune the allowance system to fit your own family's needs and lifestyle.
When your child wants a raise in his allowance, tell him to give you a proposal for how much he wants and why he thinks he needs the raise. You're now well on your way to raising a financially savvy kid!