Parents choose to give their children an allowance in lieu of (or in addition to) earnings from a part-time job for a number of reasons. Children may be too young to work at a traditional job, parents may prefer that their children focus on school work or enjoy their childhood, or the allowance may simply be a means of teaching money lessons in a tangible way.
Once the decision to give an allowance has been made, the following interconnected questions must also be considered:
While it’s never too soon to start many of life’s lessons, introducing money at too young an age may taint the innocence of youth. Beginning before basic math skills have developed may also make the concept of money seem complex, even though basic finance is quite simple. Waiting too long before introducing the concept may allow misconceptions about money to form. Every child is different, but sometime between ages 7-10 may be most appropriate.
The amount of allowance will likely be set relative to the type of lifestyle you yourself lead, as well as the other factors listed here. A dollar a month may suffice in certain situations and significantly more ($100 a week or more) may be warranted in others. You may also set a base limit that can be increased when certain criteria are met.
Is good behavior, success in school, completion of chores, or a combination of all of these (and more) required for allowance payments to continue? Establishing the expectations that accompany the allowance will set a standard of fairness and help to avoid confusion.
Will the allowance have to cover basic needs or just discretionary spending? Obviously the former case will require a much larger allowance. In the latter case, you might supplement the allowance with an occasional discussion of the cost of other items provided, to give insight into the costs of running a household.
Is the allowance given to teach lessons about money, grant freedom in spending, or for some other purpose? Defining this purpose will help to establish many of the answers to the other questions posed here. If you give your kids an allowance simply because their friends get one (or you got one at their age) you may miss out on the value an allowance has to offer.
As I said above, these questions are all inter-related. As a result, you can probably answer whichever one seems easiest to you first, and then build on that answer to help answer the rest. I suspect that many people will choose to answer the purpose question first, since there is usually an underlying inspiration for considering an allowance to begin with. Whichever order you choose to answer the questions in, asking yourself these five questions before giving your child an allowance will help to make the experience as beneficial as possible.
How did you answer each of these questions?
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