Allowance

Until your kids are old enough to get a part-time job, giving them an allowance is one of the best ways to get money in their hands.  This allows them the opportunity to "practice" money.  Practicing money involves learning how to budget, set personal financial goals, spend wisely, and invest.

  How much?

A good rule of thumb for how much allowance a child should receive per week is half their age.  So following this rule, if you have a seven-year-old, she would receive $3.50 weekly allowance.

Using this as a starting point, there are other things to consider as well such as what your budget can afford and your expectations for how the allowance is to be used.  In other words, does your child need to pull out a certain amount for tithing or long-term savings?  Will he be paying for school lunches?  Once these are decided, adjust the allowance accordingly.  The following table gives a general outline of some possible expenses your child should become responsible for.

 
6-8 year olds 9-12 year olds 13+ year olds
  • bubble gum/candy
  • trading cards
  • extra toys/stuffed animals
  • all of the previous expenses plus...
  • movies with friends
  • video games/CDs/itunes
  • all of the previous expenses plus...
  • cell phone bill
  • toiletries/hair supplies
  • entertainment
  • gifts

  Tying Chores to Allowance

There are certain responsibilities that kids have by default of being a family member.  Jim Fay and Kristan Leatherman, authors of Millionaire Babies or Bankrupt Brats, describe these responsibilities as contributions.  They come in the form of setting the table, taking out the garbage, and making our beds.  We do not pay kids for these.

There should, however, be ways for kids to earn additional money by being able to choose from a variety of household jobs.  These could include mowing the lawn, washing the car, and pulling weeds.  An allowance should give kids just enough to cover most of their weekly expenses but not enough to allow them to do all the things they want to do.  So these extra jobs offer kids an opportunity to earn extra money.

We get the best of both worlds this way:  kids who learn not to expect a handout for everything they do; but who also learn that if they need additional money, it's going to take some hard work.

Allowance Contract

 

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