To understand the basics of money management, it only makes sense that kids need real-world money experience—which usually starts with an allowance. An allowance can provide even a very young child with a general understanding of spending and saving, as well as the consequences of their spending and saving habits—both good and bad. There's no perfect formula for giving out an allowance, but there are some general guidelines to help you through the process:
Start as Early as Age 5
Many experts agree that elementary school-age children can begin to receive some sort of allowance. Most kindergarten-age children are able to identify coin and bill values. But whether you start at age 5, 6 or 7 depends primarily on the ability of your child to understand the concept of money exchange and the responsibility of having an allowance. If you've explained the concept of an allowance and you feel your child just "isn't getting it," it might be best to wait until they can fully grasp its importance and worth.
Should There Be Strings Attached?
Parents and experts tend to disagree on why an allowance is given. Most think their children should earn their allowance through chores or work around the house—if the child doesn't do the chores, they don't get their allowance. Others say that chores are the responsibility of each member of the family and should be done without a reward or allowance. Thus, any allowance given has no strings attached, which some experts recommend because the allowance is never used as a punishment. If you believe an allowance shouldn't be given for regular chores, consider giving one for good grades or extra work done around the house. Keep in mind, there's no right or wrong answer. Every parent and child relationship is different, so choose a method that works best for you.
Show Me the Money
The amount of an allowance depends on the child's age and what the allowance will cover. The general rule of thumb for a weekly allowance is 50 cents up to one dollar for every year (e.g. $3.50 up to $7 for a seven-year-old, though you many want to increase the amount per year as your child gets older). Ultimately, the amount you choose is up to you, but whatever the amount, make sure the payments are given consistently at the same time each week. For teens, give an allowance every two weeks or every month to help them learn to pace themselves in their spending. As your child gets older, they should be expected to use their allowance for necessities, not just wants, and be able to put a portion of their allowance in savings. The following are guidelines for weekly allowances by age. When calculating your child's allowance, be sure to factor in what you would approve they spend for wants, any needs they are required to purchase, such as clothes, as well as savings and charitable contributions.
|5 to 7 years||$3.25 - $4.00|
|8 to 10 years||$4.25 - $7.50|
|11 to 13 years||$8.00 - $10.00|
|14 to 16 years||$13.50 - $18.00|
|17 to 18 years||$31.00 - $40.00|
*Results are based on parent contributions to online survey at kidsmoney.org.
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