7 Things Parents Must Consider Before Giving Kids an Allowance

7 Things Parents Must Consider Before Giving Kids an Allowance

7 Things Parents Must Consider Before Giving Kids an Allowance

By Kelly Bryant

As a child, earning an allowance is fun and exciting -- it feels like a real “big kid” moment. As a parent, allowance is fraught with questions: When are my kids ready for it? What should they do to earn allowance? When should I take it away? We asked money-wise parenting experts for their advice on how to make allowance a way to raise financially-savvy kiddos.

1. Time It Right
So, when is it appropriate to start doling out cash to the kids? “Parents can start giving their children allowance around age 7 or 8,” advises Darby Fox, a child and adolescent family therapist. “By this age, children can understand money and are able to add and subtract well enough to understand the concept of money. Earning money and then correlating it with spending is too abstract before this age. There is little connection with what it really represents.”

2. Make Expectations Clear
Nothing in life is free, but what you award allowance for is very important. “Allowance should not be offered as a reward for good grades or good behavior,” explains Fox. “It should be a set amount for a predetermined set of tasks. Parents can offer extra allowance for extra chores.” The reason? “We need to teach children we expect good behavior the majority of the time, and we need to encourage their work effort when it comes to grades,” Fox says.

3. Take It All The Way to the Bank
It’s field trip time! “Setting up a savings account and a joint checking account can provide teachable moments about balancing accounts and the act of physically going to the bank to make a deposit into a savings account,” says Julie McCaffrey, a parenting expert. “This will help instill the long-term permanence of that habit.”

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4. Consider Savings Incentives
Think 401(k) plans are just for adults? Think again! They can be just as helpful for your children. “Set a kid-friendly 401(k) plan, where you match a percentage of however much your kids save at the end of each month,” says McCaffrey. “This will definitely encourage the kiddos to keep an eye on their spending.”

5. Reassess Allowance Annually
As kids grow, allowance policies are bound to change, so consider revisiting the discussion with your kids each year to pinpoint how much they should be earning and what it should be used for. “As my children were teenagers and they were interested in fashion, allowance increased and became a ‘clothing allowance,’” says Maggie Stevens, author of ParentFix. “This way if they wanted designer jeans, it was their responsibility to save and make the decisions of how they would spend the money. It took the pressure off me to spend ridiculous amounts of money on clothing I thought was silly and it also made it so I was not a judge deciding what meant the most to them. If they really wanted it, they could get it and sacrifice something else. This helps in the parent/child relationship.”

6. Keep It Separate
To help raise good financial planners, consider arranging a system for your children where they can visually see where their money is going. “We started having our daughters do basic chores like cleaning their rooms, putting away their clothes, etc.,” says Danny Kofke, author of A Bright Financial Future: Teaching Kids About Money Pre-K through College for Life-Long Success. “They could earn up to $1 a week and would divide this money into three jars -- Give Away, Savings, and Spending.”

7. No Pain, No Gain
If your charges don’t follow through on their assigned tasks, don’t be shy about taking away their allowance. After all, if you didn’t show up for work, would you still get paid? “Allowance should not be distributed if the child does not complete the tasks that were laid out for them,” says Fox. “Consistency is the most important component for both parents and children.”

How do you handle allowance in your house?

Kelly Bryant is a freelance writer and pop culture junkie. She resides in Los Angeles with her husband and their two sons. Follow her on Twitter @MsKellyBryant.

Image ©iStock.com/PhotoInc

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