Allowances as a Teaching Tool

There was an interesting article in the Weekend Journal (the Saturday, Sunday edition of The Wall Street Journal) about all the decisions that go into setting up an allowance and for what items it should be used.

Many agree its best to pay an allowance as soon as the child understands that money is the vehicle that buys things, say around the age of three or four.  In many workshops I've conducted, the general rule-of-thumb is to give $1 per week for every year of age, so if the child is five, they receive $5 per week.

Now, one must decide what the child has to give up for the allowance?  Is it time?  How much time should that be?  Is the allowance for chores around the house?  Is the allowance for doing homework?

The next issue is just exactly what is the allowance for?  Should the child learn to give to charity?  If so, how much should that be as a percentage of the allowance?  Should the child save?  What about clothes?

Personally, I like the idea of $1 per week for each year of age.  I guess I've heard it often enough that it makes sense.  In a few years, we may have to worry about inflation; that $5 for the five-year-old may not be enough.  I also feel that the child needs to do some sacrificing in order to receive the allowance.  It shouldn't be given gratis.  However, it should NOT be for doing homework, as that is expected.  The allowance has to be earned in the sense the child has to sacrifice their time in order to receive it; that way they equate what they're giving up in terms of time in exchange for the dollars.

As the child gets older, their responsibilities grow, and so should their allowance.  Perhaps when they reach the age of seven and are invited to birthday parties, they can pay for the gift out of their allowance.  When they get to be teenagers they can start receiving an additional clothing allowance from which they can buy their own clothes, and learn to make decisions on those purchases.

I'd love to hear your thoughts and comments on allowances for children.  What worked in your household???

Comments

[Sally Baskey]

I wish I could tell you that I totally have the answers about raising children and money, but I'm afraid I did nothing correctly. My daughter was never given an allowance, but she never went without anything either. I wish I had given her an allowance and taught her about spending and saving. I agree the $1 per year/per week would be a good start. I don't think it should be done in payment for things expected (like homework, making their bed, etc.). If the child does other chores around the house then I think that works. I think children should be taught to save at an early age. My child was not taught this lesson either. I am fortunate that she has grown up to be a responsible, smart young lady, but is learning about money the hard way. If I could do it over again, I would have given her a weekly allowance and told her to save 1/5; invest 1/5; spend 1/5; tithe 1/5 and give 1/5 away. I think as parents we should be responsible for their necessities, but as they grow older they should have and use their own spending money. This would include buying gifts for friends, clothes, music and movies, etc. How are they ever supposed to value money if it comes so easily!

[Chris Clarke-Epstein]

Ahmas and Buppas (our version of grandmas and grandpas) who are usually enjoy spending with their grandchildren can help, it seems to me if they put some saving into the equation.

Frank and our grandson, Quinn, work together to collect and crush aluminium cans. (The whole family saves cans for them.) They plan a date to take them to the re-cycling center (A wonderful environmental lesson in itself.) and then they go to the Credit Union where Frank opened an account for Quinn and deposit the proceeds of their labor. This particular Credit Union has a special program for kids where they match dollars deposited with Moo-la Bucks. (Hey, we are in Wisconsin!) The Moo-la Bucks can be traded for an age appropiate toy. This was Quinn gets to see his earnings grow in his account and have a treat for his effort.

[I will continue to visit enjoyed the reading thanks]

I will continue to visit enjoyed the reading thanks