All good parents want to help their children succeed. In my role as a Certified Financial Planner™, that usually involves helping parents establish college savings plans or helping grandparents plan out larger gifts as part of their estate plan. A few month ago however, I met with a parent who asked about giving their child an allowance, and I didn’t have a great answer at the time. As opinions on the topic can vary widely from, “your allowance is me allowing you to live here” to “my daughter has an allowance of $1,000 a week, is that too small?”, I decided to list out everything a parent should consider when answering the question, “Should I Give My Kid an Allowance?”
Ultimately, there is no right or wrong answer when it comes to giving an allowance. Every family and every child is different so as long as your are being intentional in caring for and teaching your child you can’t go wrong. But, here are some points to consider when making the decision:
1. Teaching Financial Responsibility:
Giving your children an allowance can be a practical way to teach them about money management, budgeting, and saving from a young age. It provides them with a hands-on opportunity to learn about the value of money and how to prioritize their spending. Each time they receive their allowance is an opportunity to have ongoing conversations about financial topics like saving, budgeting, and making responsible spending choices. You can use it as a teaching tool to impart valuable lessons about managing money wisely.
2. Rewarding Responsibilities:
Linking the allowance to chores or other responsibilities can teach your children the importance of contributing to household tasks and the concept of earning money through work. This can instill a strong work ethic and sense of responsibility in them. My parents never gave my siblings or I a traditional allowance, as they thought it might encourage entitlement, but regularly offered to “hire” us for extra jobs around the home outside of our usual chores. These “jobs” can mature with the child into work outside of the home like a neighborhood lawn care business or entrepreneurial lemonade stand as they learn that work = money.
3. Setting Expectations:
An allowance can help set clear expectations about what expenses your children are responsible for covering themselves, such as buying toys, snacks, or saving up for larger purchases. This can reduce conflicts over money and help them understand the limits of your financial resources.
4. Gradual Increase in Responsibility:
As your children grow older, you can adjust their allowance and the associated responsibilities to reflect their increasing maturity and understanding of financial matters. This gradual progression can help them develop important skills that will serve them well into adulthood. A well implemented allowance can be a stepping stone to a well balanced budget and financial success once they are on their own.
Conclusion
So, should you give your kid an allowance? Ultimately, the decision to give your children an allowance should align with your parenting goals and values. It’s important to communicate openly with your children about the purpose of the allowance and to use it as a tool for fostering financial literacy and responsibility.
For more information or for help building a secure financial future, contact us or call 530-621-1111.
