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Allowances: The Issues

When to begin? How much to give? Do you supplement allowances with spending money? When do allowances stop? Here are some thoughts on each of these issues. Use them to discuss how to handle allowances in your family. Every family is different and has to decide for themselves what to do.

When to begin

Some parents begin before ages 6 or 7, as soon as children can recognize the different values of coins. What can a pre-schooler need? Not much. The idea here is to learn balance: spend some money, save some, and give some to charity. Some parents want to start these habits as early as possible. Others parents wait until grade school – these parents feel that grade schoolers have a better understanding of money and how it can be used. Let your child's grasp of the concepts be your guide.

How much

Some experts say dollars should match the child's age: $7 for a 7-year-old. Other experts recommend one dollar for every year of school. Such a pat formula is not always realistic. The amount you give your child depends on three factors:

  • The economic climate of your neighborhood. What are other children getting? Different neighborhoods represent difference cost-of-living levels.
  • What the allowance covers. In the early years, the allowance may be used for incidentals. Later on, it will cover more. The financial responsibilities of your child should grow with age. If your teen has to fund clothing purchases, gas, and auto insurance, as well as entertainment and daily miscellaneous purchases, then you have to give an allowance large enough to cover these needs. Being financially responsible usually makes kids respect the items they buy and teaches decision-making. They will learn very soon that money is limited.
  • Other considerations. If you do not give enough money for teens to learn to save some for long-and short-term purchases, spend some money during the month, and perhaps donate some to charity, you are not providing a learning experience. If the allowance isn't generous enough, teens might spend it all because they haven't got enough money to divide among several categories.

How often

When children are younger, they should be paid every week. Young children more easily handle time in smaller chunks.

However, you might consider shifting to a monthly payment for teens. Being paid once a month more closely approximates the real world, where paychecks and bills come monthly. Plus, increasing the time between payments also increases teen responsibility to stretch those dollars. If your teen has buzzed through his or her spending money by the 10th, waiting for the 1st of the month can be a long time.

How long

Some experts say that when your teen starts to earn money at a part-time job, you can begin to reduce the amount of the allowance. The money burden is beginning to shift from inside the family to outside the family. If teens find they're running short of money, then they have choices: 1) review money management practices, with an eye toward spending 2) adjust their lifestyle, or 3) work more hours. However, working more hours during the school year detracts from studying. A better idea is to work longer hours during the summer and cut spending.

"Spending" money

Do you supplement allowances with spending money? Spending money is the money you give your kids to spend on a specific thing or event. It's Sunday and a bunch of kids are going to a matinee. You shell out $15 for the ticket and popcorn. If you supply spending money, then perhaps allowances should not be so generous. After all, you're taking care of entertainment expenses as they arise.

Allowances tied to chores

This is a major controversy. Examine both sides and then make up your own mind.

Pro-chore advocates. On the one hand, some experts say that kids have to learn the connection between money and earning it. To tie allowances to chores does that. The message to kids is that you earn the allowance – you are not simply entitled to it. The real world expects work in exchange for money.

The anti-chore advocates. What happens when kids don't do the chores? If you dock their pay, you're depriving kids of their money management lesson, which is supposed to be the purpose of allowances. Another problem: where does paying for chores end? Do you pay kids for everything they do around the house? Does paying for chores teach kids to expect pay every time they contribute to the good of the family? That's not realistic. Who pays a parent for doing the laundry and shopping? Kids must help with the running of the household. Bigger chores – washing windows – deserve pay.

Pay on time

It's a way to teach your child that commitments have to be kept and that people depend on one another.

Don't cave

Here's the scene. Your teen asks you for an advance. He's worked his way through his spending budget, and this great opportunity has come along. If you cave in, he misses the lesson of keeping money in reserve for unanticipated expenses. Bail him out often enough, and you undercut the lesson he's created for himself.

Look at the issues, and talk them over with your partner. See what fits your philosophy and works best for you. Do you intervene in how your teens handle their allowance? For answers, go to Whose Allowance Is This Anyway?