Children today are confronted more than ever before with pressure to own the latest electronic gadgets, clothes and other status symbols. This sort of pressure can get to even the most down-to-earth kids and send them your direction with all of the energy and stubbornness of their youth begging you for this item or that. Like little trial lawyers – outlining all of the reasons they really should be in possession of the new, extremely expensive smart phone *as soon as possible* (and for good measure, presenting you with a verbal account of all the other kids who already have said smart phone).
An Allowance Teaches Money Lessons
One option for teaching kids important lessons about money – obtaining it, managing it wisely, etc. – is to provide them with the opportunity to earn an allowance. They can learn to identify the difference between wants and needs, how to set priorities, and the important skill of saving money. These lessons are best taught through real experience. It’s true that there might instances where allowance money is lost or spent on frivolous items, but these instances are what we’re looking for – perfect opportunities to instruct, guide and leave a lasting impression on your child. Other valuable lessons that can be taught through an allowance are the satisfaction of working for and saving their very own money to make purchases that are important to them, and the rewarding feelings associated with making charitable contributions and being able to treat others to special things from time to time.
There are three basic strategies that are most commonly used when providing an allowance to your child.
The first is the allowance is paid only after predetermined household tasks, or chores, are completed satisfactorily, and is usually paid on a weekly basis. The advantages of this method include learning how it feels to earn money in exchange for a job well done, and parents who favor this technique believe that it’s an effective motivational tool as the allowance can be withheld or reduced when tasks aren’t completed.
The second is the allowance is given each week regardless of whether or not household chores are completed. The allowance is not used as punishment or motivation. The focus is on helping the child develop values such as completing work without expectation of reward or payment, finding pleasure in completing assigned tasks, taking pride in their accomplishments and being responsible.
The third strategy is the allowance is awarded for tasks that are completed as extra work, in addition to regular duties. Amounts are set according to each task such as $15 for cleaning out the gutters or dusting and organizing the living room bookshelves, etc.
Consider which method would be the best fit for your family and create an allowance system. As kids grow older you can introduce additional strategies such as a percent matching scheme such as with a 401(k) plan. Offer to contribute a certain amount for every savings goal that’s met by your child. This is especially effective when they are saving for more expensive items.
Take the time to put the allowance plan into writing. This will foster consistency and it’s a great to turn to when or if any misunderstandings should arise. Plus, it’s easier to follow rules when they are clearly defined.
Allowance Money Can Give Back
The most important thing I accomplished personally with my own child was teaching him the beauty of altruism. From a very young age we discussed charity and how it not only helps those who are on the receiving end, but also creates a wonderful, warm space inside of you. To this day, my son who is 21 years-old, living on his own and attending college, contributes regularly to his favorite charity, through monetary donations and physical acts of volunteerism. This is a wonderful value to instill in your child, and I highly recommend incorporating it into your family dynamic.
Try out an allowance with your child and see how it works for you.