How to give your child an allowance? That’s easy, you just hand them money, right?
While the physical act of giving an allowance is easy, there’s more that you may want to think about.
Should you Give Your Child An Allowance?
That’s the obvious first question. There is no right and wrong answer here. There are many kids who never got an allowance growing up. Many of those kids grew up to be parents who now say, “Hey, I grew up okay without an allowance.” There’s nothing wrong with that.
My opinion is that managing money helps your child begin their financial education. They start to make choices of what’s important to them. They learn to plan and save for more expensive purchases.
Getting access to money is the first step in their financial journey. I think it’s easier to do it through an allowance, or payment for extra work around the house. Otherwise, they may have to wait until they get a job like a paper route, lawnmowing, or babysitting. Aside from this, they may get occasional birthday money from relatives, but those one-time gifts are unlikely to build lasting habits.
Earning a Basic Allowance
I believe it’s important for kids to understand that they earn the allowance. They have to do some chores around the house. It could be making their beds, doing laundry, cleaning dishes, whatever you feel is most appropriate for their age group. Not only does money means more to you when you earn it, but it also creates an expectation that it is tied to providing some kind of value.
I believe children should also be given the chance to earn extra money for extra work. In our house, that means cleaning up after the dog or making him breakfast. It isn’t always clear what should count as basic work and what should count as extra work. We need to think more about how to draw that line. If you have any ideas, please feel free to leave a comment. I’d really appreciate it.
How Much Allowance to Give Your Child
The general rule of thumb is that every child should get a weekly allowance equal to their age. My 6 year old would get $6 and my 8-year-old would get $8. When I first read that rule of thumb, it seemed like it was too much. We cover many of their expenses… why do they need so much money?
However, the $1 a year rule of thumb will make more sense when you read the next section. When you budget that allowance it won’t seem like so much…
Teaching Your Child to Budgeting His/Her Allowance
There are three basic things that kids can do with their money. They can give it to someone in need. They can save it for something in the future. Finally, they can spend it.
Many people get physical jars of Give, Save, and Spend so that the allowance can be divided out.
I believe it’s important to start with the amount of money to give. As parents we don’t focus on giving. However, we have to cover basic needs like housing, transportation, and food. We also have to pay taxes. Many kids live a good life. They don’t have to pay any of those.
My kids can afford to give money. I think it’s valuable to get them thinking about others who are less fortunate.
The rule of thumb is to put one-third of the money in a giving jar.
My favorite jar is the saving jar. I’ve always been the type to save my Halloween candy for a rainy day. The comfort of having those “savings” meant a lot to me.
Saving money is important in three ways. A child can learn that they can save money for something extra special. A child doesn’t necessarily need an emergency fund, but saving lays the early groundwork for that. Finally, savings are necessary to take the critical step towards building wealth: investing. (Note: Sometimes experts make “investing” its own fourth jar. I don’t have strong feelings either way, since we sweep some savings into investing.)
Spending is very important. Children can learn a lot by spending money. They may even learn more when they make “mistakes” or realize that maybe they should have spent differently.
Give, save, spend… you have noticed that the math is easy – simply divide the allowance by three. If it doesn’t divide easily, I’d put the extra dollar in the saving jar.
When Should Give Your Child An Allowance
If there’s one theme to remember with everything when it comes to allowances, it’s that there are no firm rules. My 6 and 8-year-old don’t get an allowance yet. It’s not that they don’t deserve one or that we don’t believe they should get one. We’re simply very busy with a lot of other activities between karate, Boy Scouts, archery, and homework. The days go by so fast that we never get to everything.
I hope to get them started on an allowance in the next couple of weeks. I want to have a plan of standard chores and bonus chores. I’m also looking at getting this spend, save, give jar. We might also make due with a few mason jars and some rubber bands to hold them together.
Final Allowance Thoughts
Much of this article is based on my gut and only a little quick research into the best way to give a child an allowance. Like everything in parenting, I’m learning as I go. I’m sure there are more than a few things that I haven’t thought of. If you happen to have more experience or even different gut feelings, I’d appreciate it if you drop me a line in the comments.