Giving your child a weekly allowance can help to teach valuable money lessons at a young age. With an allowance, children learn about saving, earning money, and the value of a dollar. The following are some tips for giving your child an allowance.
The right age
When is the perfect age to start giving your child an allowance? This will vary from family to family—some families will start very young and before their children even start kindergarten, whereas other parents prefer to wait until their child hits double digits. The typical age, though, is around 5 or 6.
The right amount
Again, this will vary by family. Consider your finances, cost of living in your area, and how much you think is fair for your child. A common formula is anywhere between 50 cents and one dollar, times the age. So for example, if you have a 6-year-old child, you may want to give him or her somewhere between $3.00 and $6.00 weekly.
Experts actually recommend not tying exact dollar amounts to specific chores and household duties. Instead, make it clear to your child that you would expect him or her to help out around the house just as any member of the family, regardless of how much they’re receiving for their allowance.
Advances and saving
Your child will quickly learn the fundamentals of saving if he or she is consistently spending their allowance as soon as they get it, and then hitting you up for an advance on next week’s (or the entire month’s worth) of allowances for a larger purchase. If your child usually is responsible with saving money, an occasional advance can be okay. However, if your child is always spending the money the same day they receive it, this can be the perfect time to explain the importance of saving.
Just like your child will do when he or she is all grown up and working in the professional world, he or she may ask you for a raise. Evaluate this request in a similar way that a boss or manager would. Has your child received their current allowance rate for a lengthy period? Has he or she been a well-behaved kid, and deserving of an increase? If so, you might want to consider increasing your child’s allowance, even by a small amount. As a guideline, some parents will automatically increase the allowance amount on the child’s birthday.
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Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.