Notes on Parenting

Insights for parenting babies, toddlers, teens, and young adults.

Thursday, July 29, 2010

The question of allowances and helping children be financially literate

by Malina



My five and half year old son has been counting his money every day lately. He has six dollars and three hundred and seven cents currently. If I say he has nine dollars and seven cents I am swiftly corrected. I realized today it is probably time to open a savings account at the bank for him. 


I want my kids to make wise financial choices. I want them to learn to save money, to give money, to make a plan when they are managing money. As a result, I have spent time wondering and reading about the pros and cons of allowances.

Some advocate giving children spending money with no strings attached. Some advocate having children earn all their money by doing chores in the home. Others are very anti-allowance. They say that chores should be done just because one is a member of a family and all spending money should come from "real jobs" outside the home.

More questions: At what age should allowances start? How much? When should kids be responsible for buying their own clothes? How much information should children have about their parents' financial situation?

A popular solution to how much is to start paying children $1 a month or week based on their age, starting when a child shows interest in making money. So a 5 year old would get $5 a month or $5 a week, depending on which seems more appropriate in your family.

The age at when kids take control for their clothing budget will vary by child depending on how responsible a child is. Some kids may be ready at 12, others not until 14 or 16. I recommend this budget be cash and not credit to have real consequences to spending it all before all necessities are purchased. Parents may also take an active role, requiring kids to plan out purchases and get parental approval.

How much information to share with children about their parents finances is a personal choice. Clearly explaining to children where all the money goes each month can be a powerful financial lesson on budgeting and planning. There have been several items in the Ensign magazine about this.

Currently I am not actively using a system. I was giving them a few dollars if they completed all the chores each week But I am not very good at planning all the change and dollars I have to keep on hand to help them with tithing and savings after paying them which means I put off paying them quite often.

I like tying the receiving of money to completing household work more than just giving them money for existing because I want them to learn the value of work. I am also wary of having a child ask "what will you pay me?" every time I ask them to do something, which is why I'd rather it be a weekly payment for doing all assigned work and everything asked of them.

Really, I need to take some time each month to plan and make sure I have rolls of change on hand for paying allowance easily each week. I need to adjust their required work list and actively parent my kids on money management. I need to stop putting it off.

What do you do for allowance? What are your thoughts on earning the money versus just being given it? How are you making sure your child is financially literate?

Images courtesy of DailyClipArt.net

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