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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
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If you're not
convinced about giving your child an allowance, do
this simple activity. Help your child keep
track of their income and expenses for at least two
weeks. Use the
Daily Income and Expenses
Tracking worksheet
to record all extra items bought
for your child. These could be a slurpee at
the mall, a new DVD, or a fancy new bracelet...all
wants. Food, shelter, and basic clothing don't
go on the list. But a new school binder would,
and it would be recorded as a 'need'. (See
Budgeting Tools for ideas on teaching needs vs.
wants.)
After at least two
weeks review the list. Rate all the wants from
1 - 10, 10 being your child would buy it again.
Discuss the results. Using this information,
come up with an allowance plan that will work for
you.
You'll see that if you shift the responsibility of
all those extras to your child, they'll be learning
real life skills through managing money that would
have been spent anyway. And it may even save
you money because kids are a little more reluctant
to spend money that's theirs.
So don't think of an allowance as simply giving your
child money. An allowance is NOT an
entitlement. It's a shifting of responsibility
from you to them. And along with that comes
responsibility in the form of making good choices,
spending wisely, learning to save, living within
your means, etc. Now the next time your child
asks for something your job is to say, "Sure you can
have (fill in the blank) just as long as you pay for
it."
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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