Whether or not to give an allowance will depend on your family’s own values and financial situation. Many financial experts think kids should start getting an allowance when they are five or six years old. Allowances can help to teach your child about financial responsibility, says Janet Bodnar, author of Dollars & Sense for Kids. “When setting an allowance, decide what you expect your child to purchase with his or her allowance,” she says. Bodnar recommends a weekly allowance should equal half the child’s age.
Paying for Chores?
Most experts discourage giving an allowance in exchange for completing regular chores. Kids should do chores such as cleaning their room and doing the dishes to feel like they are a vital part of the family. If you want to pay children for chores, then the experts recommend keeping a list of chores and how much each is worth. Inspect the work the child has done and then pay the child immediately after the job to connect work with pay. Or, if the child wants a little extra income, you can pay him or her to do the jobs that you might pay someone else to do like washing the car, raking the leaves, or shoveling the driveway.
What to Use the Money For
American Bankers Association Family Finance Adviser Neale Godfrey recommends that you help your child divide the money he or she earns or receives. Use four separate labeled containers that say, 10% Charity, 30% Quick Cash, 30% Medium-term Savings (1-6 month goals), and 30% Long-term Savings (for future goals, like college). Teach your kids to donate with the charity jar. They can pick the charity of their choice. You can change the percentages to fit your and your child’s goals.
However, having a simpler savings plan might be a more effective learning process for your children, according to Cupeper-based Financial Advisor Todd Brown. “Parents rarely make monthly budgets, let alone a young child,” says Brown. “If you can do it this way, then great, but if you just stick to the 10% savings rule for yourself and the kids, then you shouldn’t have to make it any more complicated.