As if you didn’t have enough bills to pay already, your kids are going to reach a point when they’ll start asking for an allowance.
Granted, you may think that you’re already spending plenty of money on your kids. But, you’ll find it can be very helpful to give them an allowance as well. After all, if they never have money of their own, they'll never have the opportunity for hands-on learning of how to manage it. Teaching kids smart money management skills will give them confidence when dealing with money.
When’s the Right Time to Start Giving an Allowance?
Deciding when to start giving your child an allowance may vary depending on their maturity level, but you should not even think about allowances until they are in elementary school. At that point, kids understand what money is, how much it’s worth, and what they can do with it. Some kids may not be interested in money yet, in which case, it's fine to wait until later in elementary school, or even once they start middle school.
If you have more than one child, consider how the allowance will affect his or her siblings. You may want to wait longer to start giving the oldest child an allowance so you can start your other kids at the same time. Alternately, you may set a family rule that all children start receiving an allowance at a specific age, sort of as a rite of passage.
Determining the Appropriate Allowance Amount
You may have heard the rule of thumb that kids should get $1 per week per year of age. However, in many cases, this is too much money. The right amount depends a little bit on your budget, but mostly on what you expect your kids to be doing with their allowance money. They should have enough for some little luxuries, but not so much that they do not have to save for bigger purchases.
If your kids need to purchase all of their non-necessities with allowance money, they'll need more than if you buy the occasional toy or candy bar for them while you are out. In addition, if you expect them to save a portion of their allowance for future, high-ticket expenditures, you might give them more than if they just make impulse purchases.
Helping Kids Manage Their Allowance
Before starting an allowance, set ground rules about how the allowance will work. Tell your child how much he or she will get and how often, and stick to that schedule to develop consistency. Clearly outline what your child should be doing with the money, including requirements that you both agree to, such as giving some of it to charitable causes or saving some for future purposes. Besides that, though, give your child freedom to do what they want with the money, which will help them learn money management skills for later in life.
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