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| from 401kcalculator.org |
An allowance system is one option for teaching money management to kids and can be an effective tool. However, it requires more than just handing your child some cash every Friday. Here are 6 tips for creating a successful allowance system in your family.
- Decide what type of allowance system you will use. There are many, many theories of allowance. Consider these questions when creating an allowance program that works for your family.
- Will you pay monthly or weekly?
- Will the allowance be given in one lump sum or will it be divided into categories, such as Save, Spend, Share and Invest?
- Are there conditions that must be met before the allowance is given, such as chores, obligations or grades?
- Age of Your Child: Younger children are probably not ready for detailed budgeting and teenagers have probably outgrown the piggy bank. The age of your child will determine many of the details of your system. It is okay to have different methods or rules for the different ages of your children.
- Keep it simple. Your child needs to be able to fully understand the system and you need to be able to easily keep track of it. Online systems, like MoneyTrail, can keep your system organized and up-to-date.
- Keep the amount of allowance reasonable for your family. Don’t feel like you have to give your child $20 a week just because that’s what all of his friends are getting or because a random online allowance calculator tells you a certain amount. Pick the amount that fits into your overall family budget.
Once you start an allowance system, keep in mind these tips:
- Be consistent. You may need to make a few tweaks here and there to get your system working for your kids but resist the urge to completely overhaul the program until you have given it enough time to really work. Kids learn through consistency and repetition. It could take a few months for them to really get used to your system and learn to make good choices with their money.
- Talk with your child. Use the everyday, teachable moments to have financial conversations with your child. If they want a certain toy, talk with them about a plan to achieve the money necessary to buy the toy. How many weeks of allowance will it take? Are there other ways to earn money? Let them see you making money decisions and include them in conversations about it. For example, do you buy the name brand cereal or the generic? Is it worth the price difference?
By putting in a little extra forethought and time, an allowance system can be an effective method of teaching your child about money management. Have you used an allowance with your kids? What tips do you have for creating a successful allowance system?
Image Source by 401K on Flickr
Image Source by 401K on Flickr
What do you do when your teenager actually begins to earn some money through babysitting or other jobs?
ReplyDeleteGood point, Thad. There needs to be an "exit strategy." Parents need to decide when allowance will end. Some stop when the teen gets a consistent part time job. Others continue on longer. It also depends on if the allowance is just for spending money or it it is a larger amount that covers some of the teen's basic budgetary needs, such as clothes, school supplies, etc.
DeleteI never did have an allowance... and I remember being jealous of my friends. With that said, I have learned to work hard for what I have and I learned about finances in other ways (mowing lawns, etc.)
ReplyDeleteWe gave a weekly allowance, but also had extra tasks that could be done for our kids to earn more money. Making beds, keeping the room picked up, helping with the lawn cutting all were part of household chores, but helping cut up a fallen tree, cleaning the entire house or helping with auto maintenance were sometimes worth extra money.
ReplyDelete