While there is much debate about how, when, where, and why, there is little debate around whether or not giving your child allowance is a benefit to their future financial wellbeing.
Research shows that children begin to understand the concept of money at an early age. Each child may be different, but the average consensus points to kindergarten as a mile marker for starting the money conversation. Rather than allowance being a motivator for chores or getting children to contribute to the household responsibilities, allowance should be looked at in terms of an educational tool. In many cases, the allowance is the child’s first exposure to the power of personal choice that financial means can bring.
Approaching allowance from an educational position allow for greater opportunity to work alongside your child in training and educating them on the value of the dollar. In a study done by Rona Abramovitch, Jonathan Freedman, and Patricia Pliner, the three found that children who did not receive allowances at home spent more when they received store credit than when they received cash, while those who got allowances spent the same amount whether they were given cash or credit.
There are many variables associated with allowances and these should be determined based upon your specific financial situation. There is no one-size-fits-all template when it comes to setting up a system that works for you and your child(ren).
Chores vs. No Chores
There are many parents who think that allowances should be associated with household chores, seeing them as a great means for lessons about life and the pressure of the workforce that is the real world. There are other parents who believe that allowances shouldn’t be tied to chores as children are expected to clean up and help out and shouldn’t be paid for what they are supposed to do. Whatever you decide to do, be consistent in your approach. Your child will pay attention to what you do just as closely as to what you say.
The general rule is: what you can afford and not a cent more. There is no formula, as the amount of the allowance must be driven by the cash flow of your particular family’s financial situation.
What Can They Spend It On?
The best way to teach your child smart money management is by example. Whether or not you realize it, your children are sponges when it comes to learning about the world. As the greatest influence on your child’s life, what you say about money and what you spend money on will affect how they use their allowance. You can help guide your child through conversation and explanation about how money works and the value of a dollar.
You may be surprised at just how much your child learns about money from allowance. The particulars of your child’s allowance will likely look different than others, and that is ok. Knowing that you are making a positive impact in your child’s financial future should be motivator enough to start the allowance process today!
Image Source: freedigitalart.com, stockimages