An allowance is an amount of money given on a regular basis for the purpose of helping the person cover business or living expenses, according to Dictionary.com. Of course, we do not envision our children flying out on a business trip or even paying for their own housing any time soon. However, the idea of giving our child an allowance is one that we often ponder as our child begins to get older. We wonder if giving our child money is the right thing to do. At what age should allowances begin? How much should we give and how often? Finally, how will an allowance benefit the child?
Many financial gurus like Paul Lermitte, believe that parents need to teach their kids about money. Since money is something that everyone eventually must use and manage, it is important for parents to introduce healthy habits and attitudes about money. In his book, Allowances: Dollars and Sense, Mr. Lermitte discusses six dangers associated with not teaching your children about money. These include financial dependency, destructive values, debt, loss of confidence, teaching the wrong thing, and family conflict. Lermitte outlines several universal principles that parents need to understand in order to teach their children financial responsibility.
The age of the child and the interest will determine when a parent should begin lessons on money. If the child understands the concept of money and that it is used for the exchange of goods, then the child is ready for an allowance. This could mean, depending on your child’s ability, at age four or five the child is ready for small doses of money management. Generally, most kids are seriously ready around the age of eight. By this time, they have learned basic money denominations in school; they can count change and dollars on their own. The child may even have friends who are already receiving allowances and may ask about it.
Figuring out how much of an allowance to give your child can be a daunting task. Some people say that you should allot one dollar per age of the child. Others say you should give what the child’s friends are getting. However, realistically, it would be wiser to review what you already spend on them. Of course, we are talking about extras like toys, entertainment, etc. and not living expenses like housing, utilities, and the like. Make a list with your child of all the expenses you expect your child to pay with his or her allowance. David McCurrach states in his article, “Give ‘em an Allowance!”, that you should, “Keep in mind the fact that kids have three uses for their money-spending, saving and sharing. Consider all three areas when you are coming up with the amount. In addition to setting the allowance, this process puts an end to the constant requests to buy this and that and to give them money to do whatever their hearts desire.”
Tying allowance in with daily chores can be beneficial as long as it is distinguished between chores that a child must complete to be a part of a household, and chores that receive pay. For instance, making his or her bed, brushing teeth, and picking up toys after playing are responsibilities that the child must do to be a productive member in the family. It is the extra chores that can be incorporated into the allowance system. Jobs like pulling weeds, washing the windows, and babysitting younger siblings, to name a few, that a parent may wish to put a dollar figure upon. Remember, that in the adult world, people are paid to do a job outside of their responsibilities at home. This same rule should loosely apply to your child.
The benefits of introducing an allowance to your child outweigh any fears a parent may experience in teaching the values of money. The child is given the opportunity to try and fail with money decisions in a safe environment with a financial planner nearby-You! Since elementary schools do not teach financial management, it is up to the parent to make sure a child learns good habits and skills. An allowance system is a perfect way to achieve this goal.
Below, are a few interesting places to further investigate the idea of giving an allowance to your child.
Allowances, Dollars and Sense, by Paul Lermitte – Web site and book.
“Give ‘em an Allowance!”, by David McCurrach- Article
“Age- Appropriate Chores”, from Family Education-Article and hand chore chart you can print.
“Allowance Calculator”, from Pediatrics.about.com- Useful tool to decide an allowance amount.
Money Doesn’t Grow On Trees: A Parent’s Guide to Raising Financially Responsible Children by Neale S. Godfrey – Book
Money Sense for Kids, by Hollis Page Harman- Book
“Age Appropriate Chores”. (200-2012). Retrieved from Family Education: http://life.familyeducation.com/allowance/jobs-and-chores/34438.html
“Allowance Calculator”. (2012). Retrieved from Pediatrics.about.com: http://pediatrics.about.com/od/toolsandcalculators/l/bl_allcalc.htm
Crites, P. A. (2012). Should you give your child an allowance? Retrieved from University of Nevada: http://www.unce.unr.edu/publications/files/cy/2000/fs0045.pdf
Lermitte, P. (2012). Book One: Allowance, Dollars and Sense. Retrieved from Paul W. Lermitte, Family Business specialist: http://www.paullermitte.com/books/book-one-allowances-dollars-and-sense
McCurrach, D. (2012, 1 28). “Give ‘em an Allowance”. Retrieved from Kids’ Money for Parents: http://financialplan.about.com/gi/dynamic/offsite.htm?site=http://www.kidsmoney.org/allart.htm%23Fea1Copyright © Jamie Nowinski and Grandmother Wisdom/ Grandmother Musings 2012-2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Jamie Nowinski – Grandmother Wisdom/Grandmother Musings with appropriate and specific direction to the original content.