Put your kids on an allowance

Some parents (about 6 in 10) firmly believe in giving an allowance; others feel it's unnecessary.I’ll admit upfront that this is a polarizing topic. Some parents (about six in ten*) firmly believe in giving an allowance; others feel it’s unnecessary. I’m sure you can guess which camp I’m in (not-so-subtle hint: it’s the former).

Why do I feel that way? Because I give an allowance to my kids. And I think that it has helped them grow into financially responsible teenagers. The truth is, an allowance is one of the best tools in your toolbox as a parent.

I’d caveat that, of course, by saying that you have to go about it the right way. For one, you can’t forget to give it (I’ll admit, I’ve been guilty of this in the past, but I’m much better about it today. It’s important to be a stickler here because if you’re late paying your kids, all you’re really teaching them is that it’s okay not to pay their bills on time – not a lesson you want to be passing on).

You also want to use this cash to impart a lesson, which is that money – both yours and theirs – is limited. If we want to make the most of what we have, we have to make some hard choices.

Here’s my allowance philosophy:

  • Pick a starting age. I think children are ready for at least a small allowance when they start school, but every school and environment is different, so take your cues from those around you. (Just a note: In general, I hate approaches that border on keeping up with the Joneses, but in this case, I think it’s a good rule of thumb). If none of the other kids get an allowance, you probably don’t have to give one yet. If they all do, it might be time to kick one in. And if your kids are a few years apart, the younger one is likely to want an allowance when you start giving one to the older one. That’s okay, too, provided the amounts are age-appropriate.
  • Settle on an amount. For this, look at two things: What are their friends getting? And what do you want them to be able to pay for? For my purposes, I kept track of what I was spending on my kids for a week or two, then I picked one or two items that I thought they should be able to pay for out of their allowance. So maybe it was an extra snack at school, or a movie with their friends, or the gift they needed to bring to a birthday party. Whatever you decide, you need to give them enough money that they can buy some of the things they need and want, but not so much that they can buy everything they need and want. That happy balance is key. As they get older, you’ll probably want to increase the amount you give, but you’ll also add to the list of things that they’re responsible for paying for.
  • Enforce it. If you say you’re no longer footing the bill for movies, and they run out of money before the weekend, you have to tell them they’re out of luck. They will not be going to the movies with their friends this week. If you instead bail them out, you’re defeating the purpose of the allowance because you’re not teaching them to pick and choose how and where to spend their limited dollars. And, perhaps worse than that, if you bail them out, even just once, they’ll be back for more. I promise.

Are your children on an allowance? Has it been good experience for your family?

According to Boy Scouts of America 2011 Youth and Finances research

Jean Chatzky

About Jean Chatzky

Jean Chatzky, the financial editor for NBC’s TODAY show, is an award-winning personal finance journalist, AARP’s personal finance ambassador, and a contributing editor for Fortune magazine. Jean is a best-selling author; her eighth and most recent book is Money Rules: The Simple Path to Lifelong Security. She believes knowing how to manage our money is one of the most important life skills for people at every age and has made it her mission to help simplify money matters, increasing financial literacy both now and for the future. In April 2013 Jean launched Jean Chatzky's Money School , a series of college-style, interactive online personal finance courses that give men and women across the country the opportunity to learn from and interact directly with her. Jean lives with her family in Westchester County, New York.
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3 Responses to Put your kids on an allowance

  1. Trina Bettin says:

    One of the things I always think is missing from these kinds of conversations is the connections among being a parent, modern technology and the rights of privacy weighed against all the dangers out there. I would enjoy seeing a lot more people increase knowledge of these issues.

  2. Odelia Lamar says:

    An item which I suppose is missing from these conversations is the relationships between being a parent, modern technology and the rights of privacy weighed against all of the threats on the web. I would enjoy seeing more people raise awareness of these issues.

  3. ddj says:

    I pay my son for his grades. He likes the reward for his hard work and has some control for earning more w better grades. In 5th grade he got $5 for each A, $3 for Bs and $1 for any C. I increase the amount each year. It is a great motivation for better grades, and is building a good work ethic, translating to real life when he gets a job. With this plan, I can still maintain that house chores are a normal unpaid responsibility and part of family life. I do allow him to earn extra for unusual side jobs that need to be done. He has learned to manage his money very well and loves payday!

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