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Best Practices When It Comes To Kids’ Allowances

Piggy Bank

Raising kids today is expensive! Between funding the basics, childcare, saving for college, extracurricular activities, birthday party gifts and beyond, some parents might question if they need to dole out an allowance, too.

Obviously, this is a personal choice, and every family likely has their own nuances to the allowance debate, but money experts suggest a few ways to utilize allowance as an opportunity to build lifelong money management skills.

Pay for extra effort

Beth Kobliner, author of Make Your Kid a Money Genius (Even If You're Not), says parents shouldn’t give an allowance for contributing to the regular chores. Parents don’t get allowances for taking out the trash and making meals. These are simply the tasks needed to run a household. Therefore, all family members need to pitch in to keep a household running, and they shouldn’t be rewarded for doing the basics. Instead, Kobliner suggests rewarding kids for going above and beyond. Maybe they step up and do some weeding in the yard, or tackle cleaning the baseboards. Pay them for the extras, and encourage them to come to you with ideas.

Give them a weekly allowance based on age

Another approach is to give your child a set amount based on their age. Perhaps a seven-year-old gets $7 a week. These funds should then be used to help pay for certain treats the child may want, like ice cream on Fridays, or video game tokens at the pizza parlor. As the child gets older, and the weekly payout increases, the money will go toward trips to the movies, clothes and other outings with friends. When the money is gone, or if it is spent too quickly, the child will learn valuable lessons about budgeting and saving, as well as wants vs. needs.

Reward your child for saving

It’s no secret that Americans struggle to save. Retirement account balances across the country are low, and saving accounts are slim. Learning to save takes discipline, and it is a perfect skill to teach kids. Encourage your child to save a certain percentage of their allowance and then tell them you’ll match the percent they save. As they see the savings account grow through the years, they are sure to experience a sense of pride for the nest egg they’ve established, and they’ll carry this skill throughout life.

Focus more on the money discussion vs. the amount

Parents can get hung up on how much money to give their child. Yes, you’ll need to figure out the appropriate amount, but the real value is the opportunity to begin the discussion of money management. Giving them an allowance will get children used to handling and talking about money. You’ll have discussions about what they spend the allowance on, where they save the money and what happens when it runs out.

The bottom line is that money management is a life skill all kids need to learn to be successful in the world. Experts suggest starting early—as young as five—and advancing the money discussions through the years so they are ready to handle money with ease as an adult. If you don’t have a savings account set up for your child, why not open one today at UnifyFCU.com?

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