Most financial experts believe that children should receive an allowance. The earlier children are taught financial skills, the better. Money management is a skill that many adults struggle with. By teaching children early on how to manage their money, it can go a long way into their adult years.
Allowances also give children an appreciation for the value of their money. If they are spending someone else's money, they are less likely to be concerned about what it is spent on and how fast it is spent. When children have earned their own money, they tend to be less inclined to spend their money frivolously.
What Age Should Children Earn An Allowance?
Some money experts believe that as soon as children can count, they should begin to earn an allowance. Around the age of 3, children are not only counting, but they are beginning to ask for things. This is a good time to teach children that they can't always have what they want when they want it. The concept of earning something can be taught starting at age 3.
If age 3 seems like too young of an age, then it is a good idea to at least start at an age when children are beginning to understand the concept of money - usually around 7 years of age. If you start too late, it may be more challenging to teach your child money management skills. By starting young, they are more likely to heed your advice.
How Should Allowance Be Earned?
There is a great deal of opinion concerning how allowance should be earned, especially when it comes to chores. Some parents believe that chores are to be expected from children and that there should be no financial compensation for contributing to the family. Others believe that chores are the logical way to begin teaching children about earning money.No matter what your school-of-thought, there are various ways that children can earn allowance. Some of them include:
- Chores, including light housework, caring for a pet and child-safe yard duties;
- Extra help around the house
Allowance is typically given in exchange for helping out around the house. Sometimes it is only given if a child does an "extra" job like washing the car, mowing the lawn, painting a fence and other laborious types of jobs.
Some parents will actually pay their children for consistently turning in homework or earning high grades. Every family and situation is unique, so there should be a discussion with all family members on what a child can do to in order to earn an allowance.
Benefits of Children Receiving an Allowance
There are many benefits to children receiving an allowance. For example, it will help children to think more carefully about their purchases. They may have their hearts set on the latest Nintendo Wii game but understand that it will take saving their money to earn it. Learning how to budget and save at an early age is a valuable lesson.
Parents can also help children open a savings account, which is a great way to teach the importance of setting money aside and not immediately spending it all. Suddenly, a child will begin to distinguish between needs and wants, which can really help them through their teenage years and into adulthood.Here are some other benefits to receiving an allowance:
- Teaches responsibility;
- Teaches consequences if they foolishly spend their money or lose it;
- Appreciate and learn the value of money;
- Learn to work for the things that they want; and
- Understand importance of saving and budgeting.
With any decision you make as a parent, there will be a few downsides. Allowance may become a battle if your child is not satisfied with the amount they receive or how long it takes before they earn enough to get what they want. Allowance can be lost and children may end up spending their money on things that parents don't agree with.
The benefits tend to outweigh the negatives and with nearly every negative reason to not give allowance, there is a lesson that can be learned.
How Much Allowance Should My Child Receive?
The million dollar question is how much allowance a child should receive. This will of course depend on the age of the child and what the child is doing to earn an allowance. If your family is larger, that may play a part in determining the amount as well.
The important thing is to be reasonable when determining the amount that should be given. Younger children usually won't negotiate with you and will happily take whatever you give them. Preschool-aged children may earn $1 or $2 a week. As children get older, their allowances should also increase. Of course, the responsibilities should also increase. Instead of doing weekly chores, as children get older they may take on daily responsibilities.It is important for families to sit down together and discuss this. Getting a child's input and opinion can be very helpful. Of course, the final decision should be made by the parent but it is beneficial for a child to learn how to negotiate and discuss financial issues.
You will also need to decide how frequently a child should receive allowance. The standard is weekly, but you may wish to give a daily, bi-weekly or monthly allowance. Keep in mind that with young children it may be difficult to earn an allowance on a monthly basis. That can be a very long time to wait.
Not only should parents discuss with their children how much their allowance will be and how often they will receive it, but they should also discuss what is expected to earn the allowance. There must be clear rules and expectations established.
Parents may wish to oversee the spending of their child's allowance, not allowing for certain things such as spending money on candy. Other parents may allow their children to spend their money as they wish. Make sure this is established from the beginning if you do have certain expectations.
Some parents may ask that a portion of the child's allowance be automatically set aside for a charity or church. This is a great way to teach children the gift of giving to others.