In the United States, April is Financial Literacy Month. Whether or not you live in the States, it’s a good time to review your own financial practices — and consider the type of financial education your children receive.
When it comes to kids and money, there is no replacement for the allowance debate. As you consider how to approach allowance with your children, here are some things to think about. There’s no right or wrong answer; instead, think about what philosophy you best agree with, and what works best for your family.
Give Your Children Money to Manage
Most of us agree that it’s a good idea to give our children money to manage. After all, how will they begin to learn good money habits if they have nothing to practice with? Providing your children with money to manage is a way to help them learn how to budget, as well as how to save up for bigger purchases. They also learn to make hard choices with their money, and even to make mistakes. It’s possible to start providing children with money to manage when they are as young as three or four, but many parents wait until their children are five or six.
No matter when you start, the important thing is to talk about money with your children and to talk about money decisions in the home, from the time they are young. My husband and I have never hidden money talks from our son. We have always let him hear us debate the merits of different purchases, and we let him see that we pay tithing, donate to charity, and use money for other purposes. This sets the tone for money in your home, and it gives your children something to emulate.
Money for Chores?
While almost no one disagrees with the idea that children should have money to manage, the means of getting that money to them is the subject of debate. This is where you need to use your own judgment and consider how you feel about teaching your child about getting money.
One of the common ways for children to receive their allowance is to “earn” it in some way. Perhaps you require your child to perform certain chores, and dollar amounts are attached to the jobs they do. Many parents like this approach because it requires their children to work for their money.
On the other hand, there are parents who worry about paying their children for all the chores they do. After all, there are things that we do in life that aren’t about money — things we do because they are the right things to do. This view holds that chores are things we do because we’re part of a family, and everyone should help out, even if they aren’t being paid.
It’s possible to use a hybrid method, which is what my husband and I did with our son. We weren’t comfortable with the idea of paying our son to clean his room, unload the dishwasher, and tidy his project area. These are things he should be doing anyway. My husband isn’t paid for doing laundry, and I don’t receive money for vacuuming. We identified some “extra” chores that come with greater difficulty, such as working in the garden, washing the car, and scrubbing the bathroom tubs. These are chores he could choose to do for extra money.
We did give him a base allowance, but we explained that it was for him to start learning how to manage money. We told him that it would step down in amount as he aged and was capable of earning more of his own money, disappearing altogether by the time he turned 16 and could get a “real” after school job.
Another tactic is to encourage entrepreneurship. My son has opportunities to work in my home office, performing administrative tasks. He can also earn money by participating in 4-H and working hard to do a good job and earn ribbon money. Finally, we encourage entrepreneurship. We’ve allowed him to run lemonade stands (classic) as well as sell his origami creations. He even took picture of some of his origami to use as “advertising” to drum up business.
It’s not easy to decide how to approach allowance. The key is communicating with your children about your expectations for them, and being clear about what you will provide for them, and what they are expected to use their own money to pay for. If you can make sure that you are all on the same page, the situation will be more pleasant, and your child will learn valuable lessons.
How do you approach allowance?