All this week we have talked about how to teach your children about money. We left the most obvious topic to the end: should you give your children an allowance?
Today’s tip: If an allowance is appropriate, give one, if not, don’t.
Over the years millions of children have received and allowance, and millions haven’t. Children from both groups have become good money managers, and children from both groups have grown up to become poor money managers. A child’s allowance, in and of itself, won’t make you a good money manager. It’s all in how you use it.
If each week you give your child a $5 allowance, with no conditions or no direction on how to manage it, your child will get used to the idea that “money is free.” That’s a bad lesson to learn, and it will hurt them in the long term.
If you give your child an allowance, and you teach them how to manage it, an allowance can be a great learning tool. For example, you could tell your child that they get an allowance, but they are responsible for buying their own treats; you will no longer buy them candy at the store. They must budget their money.
As your child gets older, you can increase the allowance, and increase the items that they must use the allowance to purchase. If they buy their lunch at school, determine a reasonable daily budget, and give them an allowance large enough to cover lunch for a week. Their allowance should be slightly larger than their spending needs, so they can learn how to save money.
Another school of thought is that an allowance is not necessary; children should be paid for performing specific tasks. They could get paid each week for mowing the lawn, or cleaning the bathroom, or whatever other tasks are appropriate.
The point here is that no one method will work in all cases for all children. Pick a method and try it. If it works, stick with it. If it doesn’t, change things up to make it work. In most cases schools don’t teach money management; it’s up to you as a parent to teach money management, so do some research and decide if an allowance will help you teach your child to be a responsible money manager.