Allowances give them experience in money management
Raising Money-Smart Kids: Allowances
courtesy of A New Horizon Credit Counseling
In order for kids to learn how to use money, obviously they need to have some. Here is where allowances comes in handy. They can be the best teaching tool, if used right.
At what age should allowances begin?
Age 6 or 7 is usually a good starting point. Be sure the child is able to count, add, and subtract. Also, they should be familiar with the different coins and bills and show an interest in money and spending.
Should allowances be linked to chores?
The experts say no. Tying allowances to chores can lead to power struggles and take away the incentive for helping out the family with no reward.
First of all, allowance should be based on family circumstances and what you expect kids to pay for. Make kids responsible for certain purchases like school lunch, sports fees, etc. And, if a child wants something in addition to what the family pays for, they can use their own money. The whole point of allowance is to teach kids how to tell themselves "no," how to make trade-offs, and how to delay gratification instead of just saying "Gimme!"
For younger kids, a good and fair way to calculate your child's allowance is to take the child's age and divide it in half. For example, a 6-year-old would receive $3 per month, or if you can afford it, you can make it $3 per week. This is fun because the child knows that each birthday will get them a raise.
The older they are the more money they get (based upon the age-based allowance above). But, for older kids, it's advisable to agree to make adjustments for special cases such as an upcoming school trip where more spending money might be useful.
Should allowances be negotiable?
Yes! Although most parents automatically give a child a raise in allowance each year, this isn't absolutely necessary. Allow your kids to negotiate their raise and have them document their spending to prove that they need it. This is an important part of the learning process.
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