In some families, children get a small allowance as soon as they start going to school. In others, not a single penny is exchanged between parents and kids as “pay”. The decision is often based on family values and the parents’ relationship to money. After all, our kids mimic us... and our spending habits. By having to teach them the benefits of budgeting and saving - especially if you have maxed out credit cards – you’re forced to reconsider our own ways of doing things. Just like adults, kids have desires and would like to make their own decisions. However, they need a little financial education to make intelligent choices. Here are a few suggestions to help you deal with the whole situation!
Planning and organization
Allowance must rime with planning, talking and organizing! It’s an essential trio for your child to understand the responsibility that comes with the money you’re giving him. Getting an allowance allows children to understand that money doesn’t grow on trees. By giving them a certain amount every week, you are also empowering them showing them that you trust them. It’s a gratifying experience for them. And of course, getting an allowance is one step closer towards a having a certain autonomy – albeit small at the beginning - that will get increase later on when they get their first summer jobs.
Giving an allowance is not something trivial, so take the time to talk with your child about what he intends to do with his money. Help him by giving him advice, but leave him some latitude. To him, having pocket money is a sign that he’s becoming a “big kid”! He is in charge of his own money, and that also requires a certain letting go on the parents’ part. In some situations, he’ll have to learn from his mistakes. Your child spends all his money the day after he gets his allowance? Then it’s too bad for him if he can’t rent a movie with his friends on the weekend. He’ll just have to learn from his mistakes and understand that impulse purchases have consequences.
Instead of reprimanding him, teach him how to plan its expenditure, divide his allowance according to his desires and measure the impact of his choices.
You will learn a lot about your child by observing his spending habits. Is he a big spender? Does he save money to buy something he really wants? Does he notice sales in stores? Is he influenced by advertising?
Many financial specialists agree that it’s wise to open a savings account as soon as we start giving a child an allowance. This way, we’re teaching our kids the basics of saving and helping them better evaluate their wants and needs and space them in time.
Getting an allowance can help kids…
- Learn the value of money
- Better manage their wants and needs
- Make choices
- Learn to negociate
- Be responsible
- Be autonomous
How much to give?
To determine how much to give to your child, rely on your budget and not on what the other kids are getting. The goal is to find an amount that’s reasonable for you and your child. To determine the amount, think about what you pay for him and what you won’t pay for anymore. For example, you can give him a bigger allowance if you decide that you will no longer pay for movies tickets, video games rentals or an umpteenth nail polish. Of course, you will continue to buy him necessities, but if he wants a special pair of shoes, it will be up to him to pay the difference between what you're willing to pay for an "ordinary" pair and an “top fashion” pair.
Some parents base their choice on age : 7 years old = 7 $ per week, 8 years old = 8 $ per week, etc. You also have to be realistic. If your child mostly wants to rent movies with his allowance, giving him 4 $ a week won’t be enough to cover the 4,99 $ cost! And in that case, chances are that he won’t save up to rent a DVD in two weeks!
Finally, another good idea would be to space out the payments when the children grow older. Changing to an allowance every 2 weeks or every month would teach them how to better manage their money and plan in advance.
"How much do I get for taking out the trash?"
Beware! Here is one of the pitfalls of an allowance. Your child may wish to negotiate a little money every time he performs a chore. Giving money for household chores doesn’t encourage the sense of sharing nor the collective responsibility. Mutual help among family members should not be redeemable for cash. Every family should decide which tasks can be paid for, and which can’t. Determine in advance the tasks for which you will pay a special allowance. If, for example, you pay a neighborhood teen to mow your lawn, you can give the same amount to your child if he wants to handle this task.
To avoid having to negotiate with a “How much do I get for taking out the trash?” or “Do I get money for doing my homework?”, make two lists with your children. One with everyday tasks (making their bed, picking up their clothes, emptying the dishwasher, taking out the trash, etc.) that are not open to negotiation and for which they will not be paid for. Be clear and firm on this point. Then, list the outstanding tasks for which you will pay them (for example: cleaning the windows, painting the fence, washing the car, etc.).
According to specialists, giving an allowance according to the child’s academic performance is a bad idea. Yes, it’s a little extra when he gets an amazing report card, but it’s not so good on a daily basis. Education is too important to convert it into cash like this.
According to Lewis Mandell, professor at the University of Buffalo and financial education guru, pocket money could be harmful, especially if it’s not managed very strictly. “Getting a child accustomed to receiving money without effort is the best way to prepare him for social assistance”, said Mandell in the August 2009 issue of L’Actualité.
Source : L’Actualité, August 2009
Stop!
Even if you’ve decided to give your child an allowance, your job does not end there. You still have to supervise him during the first few months, accept that he will buy stuff that you think is superfluous or unnecessary, but of course intervening if his purchases go against your values (cigarettes, degrading magazines, lottery tickets, etc.). At that point, you could easily stop giving him money, or at least have an honest discussion with him. Because putting an end to the allowance could motivate him to find money in other inadvisable ways.
Finally, it could be easy to use money as a punishment or blackmail, but you wouldn’t really get anything out of it in the long run. He didn’t make his bed? How can you deprive him of his allowance if you do not pay him for this type of task? Be consistent and trust your judgment. It is the beginning of a common learning experience, but mostly a learning experience for your child who is learning how to behave in the adult world. You are trusting him, so he must understand that he can’t betray that trust.
