Learning to manage money is critical to life success, and ideally it should start young. For many kids, this starts with allowance. But as a parent, when do you start giving allowance and how much? Do you tie allowance to chores? And does the national economy affect your child’s allowance?
Talking money with our kids can be a loaded conversation – particularly if you don’t feel comfortable talking money yourself. But teaching kids about money and the value of products and services is critical to their future success. Whether we like it or not, we all live in small and large economies where currency and values are being exchanged and evaluated constantly. Starting kids out with an allowance is a simple and smart way to start teaching about financial and economic issues.
How much, and when?
When a child starts asking the questions, “What is money?” and, “How much does it cost?” he or she is likely to be able to start handling money, though not necessarily an allowance yet. You can teach about counting and social interacting while helping your toddler pay for a piece of candy or a small toy, but until that child can understand that the coins and paper have real value and they need to put them in one safe place, it’s not yet time for allowance.
Many families start allowance when a child starts school, and tie the amount to the grade in school. For example, for a Kindergartener, 50 cents a week, one dollar for a first grader, and so on. When you get up to older grades, you can make further adjustments as necessary. For example, an 8th grader who does some babysitting doesn’t necessarily need the same amount of allowance, but one that doesn’t might need a little more to be able to go to the movies with a friend.
Cash – or account
While the weekly handing out of cash has been imortalized in minds and art, some families opt for an accounting system. Using computer-based money management applications, you can “add” money to your child’s account weekly, and then dole out from that account as needed. Using such applications are also a good way to help kids track where money is going, and to help encourage kids toward real savings.
Also read: 5 Ways to teach kids about saving money
Chores and barter
Some families choose to tie chores to allowance and some don’t. There are reasons for both approaches, but whatever you choose on that front has to feel comfortable to you – and needs to be consistent. Will your child only get allowance if he or she completes all chores. Will you give a portion of the allowance if only some of the chores are undone? And what constitures a chore that earns money as opposed to regular family responsibilities?
Then there are economic realities that face families. Tough economic times mean reduced income for families, and that often means reduced or eliminated allowances for kids. In those situations, you can switch to a different kind of currency – time and attention and favorite activities have value, too, and can be a subsitute for dollars and cents in some situations, whether temporary or permanent.
Allowances are a great way to start teaching kids about money management early, but there’s no one way to approach allowances. Whatever approach you choose, helping your kids learn about money and value and economics is a lesson that will stick with them their whole lives.?
More tips on teaching kids about money:
- How kids can make money
- How an allowance teaches kids about money
- Kids allowances: Expert approved real-world approaches