In today’s economy, we’re all tightening our belts and thinking more about where money comes from and where it goes. As a mom, you’re probably also thinking about how to help your children understand the basics of money management.
On the surface, the answer is easy…give them an allowance so they can experience handling their own finances. The reality is that there’s more to it than that.
When Do I Start Giving An Allowance?
When to start giving an allowance is a very personal question. You should start early, as soon as your child expresses an interest in and understanding of money. Usually in first grade, children begin talking about money and recognizing the various denominations. At that age, they can begin to understand the prices of things and should start to have the maturity to set priorities and delay gratification at least for a little while. Some children may be ready earlier and some may be ready later.
How Much Allowance Should I Give My Child?
This is another personal question and depends mostly on what you intend for your child to do with his/her allowance. I have read that a good starting point is $0.50 per year of age or $1 per grade in school. You can also ask around to find out what the going rate is among your child’s friends or track how much money you spend on your child over a period of a few weeks and go from there. Recent surveys have shown the national average to be $5-6 for 6-8 year olds and the average increases about a dollar per year of age.
The best advice I’ve found on how much allowance to give comes from Janet Bodnar, senior editor of Kiplinger’s Personal Finance. In her book Dollars & Sense for Kids, Bodnar explains that you should give your child enough of an allowance that they can squander it, but not so much that you’ll be upset when they do.
How Often Should I Give My Children Their Allowance?
For younger children, you should pay the allowance weekly but as they get older, you may choose to pay them when you get paid. Paying bi-weekly or monthly can help older kids work on budgeting. If they blow their whole allowance for the month, then it’s gone. Better to go without snacks or movies for a couple of weeks as a teenager than to go without rent, groceries, or a car payment when they’re in their twenties!
Whenever you choose to pay your child’s allowance, one thing you must keep in mind is that you are modeling money management skills by paying them. Forgetting to pay the allowance, “coming up short”, or borrowing from your children is probably worse than not giving an allowance at all. You must be consistent about paying your children on time, no matter how often you pay or in what form.
How Should I Pay My Kids’ Allowance?
The most common form of payment is probably cash. That’s the way most of us remember getting our allowance and it makes sense because children can see and touch the money and understand how it comes and goes. Especially for younger children, this is probably the best option because it is the most concrete.
In this age of online purchases and debit card transactions, it makes sense for older children (teens) to have their own checking account. Most banks and credit unions offer checking accounts for teenagers with no fees and some include various parental controls and learning tools for the youngster.
Another option is a “virtual” kids account. If you don’t want your child carrying cash and you don’t want to have to keep up with their money for them, you can use a blank check register to set up a “virtual” account. Have your child enter the deposit amount each week and then when you’re in the store or on the internet and the child wants to purchase something, you can pay and just record the “withdrawal” in the register. This can be a little more complicated, but there are some valuable lessons to be learned.
Photo by Penny Mathews
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I’m interested to hear from you! Do your children get an allowance? If so, how much and when did you start? Besides allowances, what other ways do you teach your children about money and finances?
Barbara Thompson is a busy single mom to one preschooler and one kindergartner. You can read her news, reviews, advice and inspiration for single parents at National Single Parenting Examiner. Barbara also writes for Suite101 and contributes to the Homebased Working Moms blogs. You can contact Barbara at busymombarbara at yahoo dot com.
Our children must EARN their allowance, no freebies!! As a single parent that was *less* than good with money throughout my youth, teaching children about money is CRUCIAL, in my mind. I’m not going to blame parents, schools, etc, but quite simply, I clearly “didn’t get it”, and I am still paying for those mistakes a decade later! And quite frankly, I hate the position I got myself in, everytime I pay off my past debts… I could have used my time/money sooooo much better.
we havent gotten this far, but i do try to do my best w/ teaching charlotte things COST money. She gets that part.
trisha
momdot.com
The kids here have just one chore each, and they are paid accordingly. If they fail to do their chore three times in a row, they pay us, the parents for doing their work for them. Needless to say, they don’t forget 3 times in a row anymore.
And no, they don’t pay us our usual hourly rate, just the 2 dollars they would’ve been paid for the chore.
Yep! We have a weekly chore chart handing on the fridge with jobs that need done each day. The kids know that if they have an X in every square (did all their chores) we go to the Dollar Tree and they get to pick out one item of choice! Whatever they want
Our kids are still young enough that this excites them! smilinggreenmom *tweet me!
I started giving my children an allowance at about age 3. They got 25 cents a week….10 for church offering, 10 for savings, and 5 for personal spending jar. When they started school it was increased enough to cover lunches and scout dues for the week, and a little more for spending. Each day they counted out the money for lunch and counted out their own money for church and scouts. They had separate jars for each account. They were taken to the bank to open savings accounts and were thrilled when they took their jars in to make deposits. As soon as they were able to write, they kept their own passbooks, with assistance. They are both grown now and have always been very independent.
I never got an allowance as a child. My parents kind of gave me money as I needed it. I only received money from them if I was behaving, doing chores, etc. My sister tended to not behave, not do chores, etc and so they rarely gave her money.