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Why every child should get an allowance.
To give or not to give an allowance is an age old parenting question. A quick google search of the subject will give you loads of conflicting information. Some people believe that kids should not be given an allowance unless they earn it through chores. While others believe that kids should be given money no strings attached. Below are the 5 reasons that kids need an allowance.
Why it’s important
- Delayed gratification: Most people can agree that giving a child everything that they ask for immediately is a recipe for disaster. It also removes the connection between want and need. Giving a child an allowance teaches them the importance of waiting for the things that they want. If they have to wait until they have saved enough money for the item or until they go home and retrieve their money they are more likely to think twice about the purchase.
- Budgeting: An allowance is the first form of paycheck that a child will have. Receiving there set stipend weekly or bi-weekly allows a child to create a budget for themselves. Giving a child a blueprint for spending and saving helps form the foundation for healthy spending habits later. Dividing their allowance into spending and saving categories when they first receive their payment also teaches the importance of goal setting.
- Saving: Teaching children the importance of saving for specific things will create a mindset of temperance. It teaching them goal setting skills. According to roostermoney.com the top 3 things that kids save their money for are cell phones, Lego and Nintendo Switch. The sense of accomplishment that a child will gain from setting and achieving the goal of saving simply can’t be taught. An added bonus is that the child will probably take better care of the item better than if it were just handed to them.
- Charity: Charity is something that, in my opinion, should not be overlooked as an important skill for children to learn. Giving to a worthy cause helps children feel as if they are contributing to society. Weather your child gives to their local church or to the humane society they will feel connected to a cause greater than themselves. Charitable giving also teaches children that they money can do more than just purchase toys and trinkets for themselves. It will give the child a sense of purpose and pride when they think about the good things are being done because they gave a portion of their stipend.
- Autonomy: Children will gain a sense of autonomy with an allowance. Knowing that they are free to do whatever they want with their money gives them strength. The look on a kids face when they realize that they can have anything that they want, within their budget, is priceless. They walk a little taller and may even take more time making thoughtful choices instead of grabbing the first thing that catches their eye. Being able to purchase what you want is empowering and can lead to higher self-esteem as well.
How much is enough?
Now that we know the top 5 reasons kids needs an allowance we can dive into the tricky question. How much allowance should you give? A common rule of thumb for determining how much of a stipend to give is $1 per year of age. For example a 4 year old would get $4 while a ten year old would get $10 per distribution period. This is a system and takes the guess work out of what the amount should be. Depending on your budget you can determine if you give this amount weekly, bi-weekly or monthly. I recommend that whichever schedule you choose keep it as consistent as possible. When kids are younger they won’t notice if you miss a “payday” but as they get older and start budgeting for their wants they will notice.
Should you tell them how to spend their money?
It is our job as parents to give our children direction so it is acceptable to tell them how they should divide their money. In our house I have my daughter use an 80-10-10. 80% of her allowance goes to spending. 10% goes to savings and 10% goes to Charity. You will need multiple piggy banks or savings jars that can be labeled for the different categories. This will help make the separation more defined and reduce spending from the wrong bank.
I started giving my eight year old daughter an allowed at age 4. After 4 years she automatically takes her money and divides it as soon as she gets it. She chose the Humane Society as the charity that she saves for and makes a yearly deposit in person. Being able to give her money to helping animals and being able to pet the animals that she is helping makes it real for her. It also keep her committed to saving for them. Sometimes she adds extra to her charity bank.
Should allowances be earned?
Giving children money with no work attached to it has its followers. There are people who believe that children should do chores without pay because they are members of the household and they should contribute for the greater good of the family. Other people believe in tying chores to an allowance to teach work ethic and the value of working for pay. Both of these approaches are valid and have merit. As a parent you will have to determine which of these approaches are best suited to your lifestyle.
Personally, I believe that children should be given age appropriate household chores and compensated for them. According to roostermoney.com children in the United States tend to start earning an allowance in exchange for chores between the ages of 4-11. The most common chores are cleaning, laundry, pet care and taking out the trash. The approach that works for us is a hybrid of these two approaches.
There are chores that are part of her allowance and chores that unpaid but are expected of her as a member of the household. Feeding the cats, putting her dishes in the sink and keeping common areas clean are good citizenship. Helping with yard work, cleaning her room, putting dishes away, etc. are some of the activities she is compensated for. As she gets older and gets a “raise” we add additional items to both the paid and unpaid chore chart. You can find a list of suggested chores based on age here.
They will thank you later
The basic financial skills that you are teaching your children by giving them an allowance can’t be learned in a book. Delayed financial gratification, autonomy, saving, charity and budgeting are the first steps to financial freedom. Equipping children with these skills should make them less likely to fall into debt. Many adults state that they never received any direct financial education from their parents. They attribute this lack of foundational knowledge to their poor money choices as adults. While personal responsibility is a factor, people who have had years of practice with budgeting, under controlled circumstances are better equipped to recover quickly.