Allowances And Kids

Money management is an important skill for kids to learn. If kids learn how to manage money while they are young, they will be better prepared to handle their finances as they get older and have to budget, pay bills, and save for college.

One way kids can learn money management is through an allowance. An allowance is a specific sum of money given to kids, usually once a week, by their parents.

When it comes to kids and allowances, some parents are for them, while some are against. The following are some things to consider about allowances and kids:

Allowances teach kids how to save.

One of the most important aspects of an allowance is the fact that it teaches kids how to save up for what they want. If you are going to give your kids an allowance, also consider taking them to the bank and opening up a savings account. This will help them watch their money grow and be excited about saving for things they want.

Allowances teach the consequences of spending.

An allowance also teaches them the consequences of spending wisely and unwisely. For example, let’s say your child gets five dollars a week in allowance and wants to buy a fifteen dollar toy. He may have seven dollars saved up, but then spends his entire allowance next week on candy, illustrating that he will have to wait even longer to purchase the toy he wants.

Allowance gives children a sense of independence.

Kids like having their own money, and they like purchasing things for themselves without having to ask their parents for it. An allowance is a stepping stone for kids, allowing them to learn about money and how to spend and save before they get their first jobs.

Things to keep in mind:

If you plan on giving your kids an allowance, consider the following tips:

•Don’t tie an allowance to chores. Most experts will agree that making an allowance conditional upon completing certain chores is not the best approach to take. When they are paid to do chores, they will not learn the value of helping out around the house and contributing to the family because they are a part of it. You can, however, pay them to do extra work around the house in addition to their chores if they would like more spending money.

•As kids get older, their allowance should increase. Three dollars a week might be sufficient for a five year old, but as kids get to be eleven or twelve, their tastes, hobbies, and activities get a little more expensive; you don’t want your child to have to save up for three weeks just to go to a movie with friends. If you can afford it, increase the kids’ allowances each week to about one dollar per year of age.

•Don’t start too late. Many people wait until their kids are around ten to start allowances, but it’s better to begin earlier, like at four or five. This is a good time to begin giving kids an allowance because they are more likely to take their parents’ advice about money than an eleven year old whose money is burning a hole in her pocket.

Allowances are a great way to teach kids the value of money as well as how to save and budget.