There are varying schools of thought regarding kids and allowance. On the pro allowance side are those who believe it gives kids a jump on lessons of money management and financial literacy. Others claim that kids should do chores because it’s expected that they help the family. For those who believe in kids and allowance, here are the various types of allowance, as well as some ideas for helping your working child to be successful with money.
Kids and allowance – Know the types
Parents and caregivers can choose to distribute a child’s allowance in a variety of ways. First, there’s the unconditional allowance. So long as the child does an appropriate allotment of chores, there is a regular, set disbursement of money. Critics claim that this technique of allowance distribution contributes the least to financial literacy and the value of a job well done, as there is no special consideration given for any well-performed task.
The “pay as needed” approach involves kids asking parents for money when it is needed. This may assume that the children have earned it by keeping up with their regular chores, although it also many not. The lack of an immediate, strong correlation between the completion of a job and compensation makes this method less popular than others, particularly the “earn money for chores” approach. In this case, kids are paid right after doing a previously agreed upon task or series of tasks. Jobs may pay differently, depending upon the difficulty and need.
Many families that support the idea of kids having an allowance use a hybrid method that combines many of the above elements.
Kids and allowance – The importance of flexibility
As a parent, allow yourself some flexibility when it comes to how allowance is given. If you have multiple children, you may find that one technique works better for one child versus another, so you should adjust your allowance approach accordingly.
Kids and allowance – Knowing the market
This touches upon the “How much should I pay?” question. Generally, this will vary depending upon the market in your region, but $1 per year of age weekly is not out of the question. That way, a 10-year-old might earn $10 per week. A straight fee that is appropriate to the age and needs of the child also works. The key at all times is that allowance should help kids learn money management, budgeting and how developing a savings can make future desired purchases a reality.
Kids and allowance – What to do with the money
Teach children not to spend all of their money as soon as they receive it. While it is important to allow kids to spend money that belongs to them instead of controlling what they do – a real self-confidence killer – it is also important for a parent to offer some gentle guidance. Building a savings and even donating to charity are admirable goals that kids should be exposed to at an early age. Teaching kids to apportion funds into spending, savings and charity – a three-jar or three-piggy bank system – is important.