Parenting Insights
By: Jenna Martinez
Updated: July 2, 2021
Originally Published: March 12, 2021
Teaching children about money management is a crucial life skill that often holds more value than advanced subjects like trigonometry or quantum physics (unless they aspire to be astronauts). One common method many parents use to instill financial wisdom is by introducing an allowance system. An allowance helps kids grasp budgeting concepts and understand the importance of choices, trade-offs, and consequences. Ultimately, they learn that money doesn’t just appear magically.
While guiding your kids toward financial responsibility is invaluable (pun intended), there are several factors to consider. For instance, how much should you allocate for their allowance, and what actions will they need to take to earn it? Do tweens receive a higher allowance than younger children? Is the amount significant to you, or is your focus more on teaching them the balance between saving and spending? If you’re contemplating an allowance for your children, here are some key considerations.
What’s a Suitable Starting Point for Kids’ Allowance?
Before offering an allowance, reflect on your motivations. Are you looking to instill a strong work ethic? Do you want them to learn wise spending and saving habits?
An allowance can teach your child about budgeting and the balance between wants, needs, and future purchases. It encourages goal-setting and fosters a sense of independence. Knowing your intent will help you determine both the amount and what behaviors or tasks will warrant the allowance.
How Will Your Kids Earn Their Allowance?
You can choose between a fixed allowance or a pay-per-task system. Some parents prefer a daily allowance with flexible earning methods, while others might assign specific dollar amounts to certain chores. For example, washing dishes could earn $4, mowing the lawn $5, and taking out the trash $2. This way, children can select which tasks to undertake and earn money accordingly.
This approach can motivate children to take initiative with household chores. However, be cautious; if you have an ambitious mini mogul, they might want to claim every job, leading to unexpected expenses. Additionally, one child could accumulate more allowance than another, sparking sibling rivalry.
Another aspect to consider is whether to use allowances as incentives for achievements beyond chores. For instance, you might want to motivate your kids to excel academically or engage in extracurricular activities. However, be aware that this could shift their focus from intrinsic motivation to monetary rewards, potentially hindering their development as they transition to college without such incentives.
How Much Should You Provide as Allowance?
Average allowance statistics indicate that children in the U.S. receive around $30 weekly, totaling approximately $120 monthly or $1,440 annually. Here’s a quick overview of average weekly allowances by age according to RoosterMoney (considering inflation):
- Age 4: $3.97
- Age 5: $4.89
- Age 6: $5.81
- Age 7: $7.30
- Age 8: $7.66
- Age 9: $8.20
- Age 10: $9
- Age 11: $10.10
- Age 12: $10.96
- Age 13: $12.10
- Age 14: $13.34
Allowances may also increase during special occasions like birthdays and holidays. Establishing an allowance opens the door for discussing money management with your children. Ensure you discuss budgeting and what expenses they should cover with their allowance. This will help them become adept at managing money.
What is a Kids’ Allowance App?
If you’re seeking a more efficient way to manage your children’s allowance, consider using an app. Here are a few programs designed to aid kids in managing their finances:
- GoHenry: This app caters to ages six to 18, allowing kids to save and manage money with a parent-controlled debit card. Parents can digitally transfer allowances and set spending limits.
- Greenlight: A family-friendly app that provides tools for parents to manage their child’s finances while teaching kids about spending, saving, earning, and donating.
- FamZoo: This app helps kids track their money and offers a debit card. It promotes good saving habits by allowing children to allocate funds into different accounts for spending, saving, and giving. Kids can also automate payments for subscriptions like games or music apps.
Tips for Parents Regarding Allowance
Managing an allowance is a significant responsibility that requires cooperation from both parents and children. Here are some tips to facilitate a smooth process:
- Discuss goal-setting with your child. Having a plan for their funds allows them to set achievable financial goals.
- Avoid giving advances on their allowance, as it’s crucial for children to learn the value of saving and earning.
- Choose a consistent payday and stick to it.
This article was originally published on March 12, 2021. If you’re interested in more parenting insights, feel free to explore our other posts, such as this one on home insemination.
Summary
Introducing an allowance can be an effective way to teach kids about financial management, helping them understand the concepts of budgeting, earning, and saving. Consider your motivations and how you plan to implement the system, whether through chores or other achievements. Use technology wisely with apps designed for managing allowances, and remember to set clear expectations and goals to maximize the benefits of this teaching opportunity.