Feature Articles: Family Finances
Children and allowances
Are you trying to decide if you should give your child an allowance? Consumers' behaviors change depending on who is paying, and children are no different than adults. Children may be willing to spend your money with unbridled abandon, but you may see their spending habits change when it comes to spending their own money.
Giving an allowance to a child can provide many benefits besides an income. With some direction from adults, children can learn about saving, delayed gratification, spending motives, and money management.
If you are wondering when to begin giving your child an allowance, how much money is appropriate for your child, or if they should be paid for chores, here are some guidelines to consider when making these decisions.
First of all, if possible, do not tie a child's allowance to his or her required chores. Children should do chores as part of their responsibility to help with the family's needs, not because they are being paid for them.
So how much is a good amount to give to a child? Depending on the family income, one to four dollars per week for children ages 6 to 8 and four to eight dollars per week for children ages 9 to 12 would be a good starting amount. You may want to give the allowance in a variety of denominations (including both coins and bills). This may make it easier for young children to divide their allowance into various categories.
Sit down with your children and help them draw up a spending plan for their allowance. Explain to them what you will pay for (school supplies, clothes, etc.) and what they will need to use their allowance for (video games, going to the movies, etc.). Encourage them to save a certain percentage, such as 10 percent, of their allowance each time. Try opening a savings account at a local bank. Many banks will open savings accounts with little or no initial investment, and this will give your child the opportunity to understand how an account works. Provide a place for the child to keep the rest of his or her money (a special envelope, box, or a piggy bank).
Helping children learn to live with their spending decisions is another benefit of them having an allowance. Children need to learn to think through their purchasing decisions and then assess whether it was a good decision or not. Allowances can also provide a sense of ownership and responsibility.
Most importantly, discuss all of these issues with your children. Children will not automatically learn good saving and spending patterns by simply receiving an allowance. Have regular meetings with your children to discuss sound financial behaviors.
Adapted from material written by Mary Anne B. Pettit, Center for Economic Education, Southern Illinois University-Edwardsville
Last update: Tuesday, June 02, 2015