Parents have different ideas about giving allowances to children. There are benefits to giving allowances, but you need to have a fair system that you plan out in advance. There are several things to consider in determining how to handle allowances in your family.
The main benefit of giving your children allowances is that you can help them learn money management skills. The only way to learn to handle money is to actually have money. If parents just buy everything for their children, the children do not develop a concept of how much things cost. Without some kind of income, they cannot learn to make decisions about what to do with money. Many adults have poor money management skills, and have to learn by making mistakes when real life and large amounts of money are involved. Giving your children allowances will let them make mistakes with small amounts of money, and learn to make better choices as they grow up.
Children usually begin to show an interest in money around age three or four. When they have a basic understanding that money is used to buy things, they are probably old enough to start having an allowance.
Determining how much a child should receive is one of the hardest parts of giving allowances. You will probably want your children to use their allowances for three basic things: spending, saving, and giving. You need to decide what you expect your children to spend their allowances on. Calculate how much you are already spending for things that you want them to start buying with their allowances. For example, maybe you want them to take over buying their own gum, toys, and special clothes they want. Add enough for them to save some and give some to church or charitable causes. Do you already give them a dollar to put into the collection plate at church or into the Ronald McDonald House box? If you come up with an amount based on these things, you are not really dipping into your budget; you are just shifting the responsibility of these purchases to your children. Re evaluate their needs on a yearly basis to accommodate changes as they get older.
In order to encourage them to really develop good money habits, help them keep records of their money. Some banks will open accounts for children with a small amount of money. This is a great way to give your kids realistic experience to prepare them for the future. Help your children see where their money has gone and how much they have saved.
One of the biggest questions many parents have is whether allowances should be dependent on chores. Chores are a basic responsibility for each member of a family, so linking the two is not a good idea. Receiving an allowance can be considered an allotment to each family member, just like food and shelter are provided for them. However, it is a good idea to offer extra money for extra work that your children do.
Allowances help your children become more responsible and learn to manage money well. Consider developing a fair system of allowances, and your children will be better prepared for their financial futures
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