Kid’s Allowance
Giving kids an allowance is a great way to teach them valuable money management skills. Most individuals learn about money management later in life, through successes or failures that necessitate an earnest analysis of the financial world. An allowance lets your child learn about money while the stakes are still under $10.
When Should Kids Allowance Start?
When your child starts showing an interest in money, he may be ready for an allowance. Because some children may not explicitly display this interest in money, keep in mind that many parents begin an allowance for kids roughly between the ages of 6 and 8.
Teaching The Value of Money
Starting a children’s allowance is the perfect time to teach your kids about the value of money. Start by explaining that money is earned for goods or services rendered and that money can be exchanged for goods or services. The concept of bartering may help a child understand more about money, as many children barter among friends. It may also be helpful to bring up the idea of bargaining as this introduces the notion that money is relative.
You should also talk to your child about the value of saving versus spending his allowance. Show him by drawing a simple graph of how money adds up. If you’re giving your child $8 a week, then saving all his allowance will amount to $410 at the end of the year. Explain to your child that he can put away a portion of his allowance each year and spend the money on a larger item or keep saving throughout the years.
What Should Kids Use Allowance For?
Remember that you shouldn’t interfere too much with what the allowance is spent on; limit yourself to minimal guidance. Your child should feel like they have the power to make decisions with their own allowance. Also remember that important lessons can be learned from making bad spending decisions.
What Is An Appropriate Allowance Amount By Age?
The question is, how much allowance? The appropriate allowance month is dictated by various factors, including the family’s financial standing, how much you’ve been giving your child to spend per week and, of course, their current age. Weigh these factors when deciding the allowance amount. Many families bump the allowance up by a dollar at each birthday—for example, an allowance begun at age 6 at $6 will become $8 at age 8. Again, the best advice is to weigh your own situation when deciding the appropriate allowance amount.
Should You Attach Chores to the Kid’s Allowance?
Giving your child an allowance for performing certain chores around the house is your personal decision. Proponents of chore based allowances point out that performing work for money teaches children the value of money better. Other parents decide to give the allowance separately from chores and pay children extra for individual chores performed.
Learn how to teach your kids about financial planning here.
