Giving an Allowance
Giving your child an allowance can be a great tool in a parent's arsenal, teaching the value of work as well as money management. But deciding if, when and how much is not always a simple task. While there are many ways to use allowances, here are some questions to consider:
Should a child receive an allowance? "Yes," says Randy Coulman, a Medford-based volunteer budget counselor through Crown Financial Ministries. "In a family, everyone should share in the opportunities, responsibilities, rewards and income." But each family will need to determine how that co-operation will be put into practice.
Should the allowance be linked to chores? Part of the value of an allowance is the link between responsibility and reward. Michelle Jensen, parenting specialist with Parent Resource Center in Ashland confirms, "Don't give it to them for nothing. Give it to them because they earned it." But some families are cautious about putting a price tag on everyday chores and maintain that chores are simply the expectations of being part of the family. In such a case, consider giving additional jobs around the house that are the basis for an allowance.
How much should the allowance be? The allowance should be proportionate. You certainly can't give your children more than you can afford out of the family budget. A guideline Coulman suggests is "enough to look forward to and to teach budgeting, but not so much they don't need the opportunity to do extra work." It also needs to stay in proportion with your expectations. If you decide that gifts for others will come out of allowance funds, for example, then you need to make sure the allowance is adequate.
What age should you start giving an allowance? Again, each family needs to make that decision. But it's important to be realistic based on your children and their capabilities. Jensen points out that an allowance doesn't have to be cash. Particularly for younger children, a "barter" system may be more effective. "You need to know what motivates your child," she reasons and it may be more productive to establish the work/reward concept by skipping the money stage and offering a toy, game or activity they want in return for a set number of tasks completed.
What should the allowance be used for? If the goal of the allowance is to teach money management, there are some interesting options. Coulman advocates teaching generosity and savings along with using the allowance for spending money. As children grow older, you can introduce both short-term (ice cream on Sunday) and long-term (college or a car) savings. Coulman makes use of a "family tax" - a percentage that is put into a family fund. "They might as well get used to the idea that the government's going to want some of their income," he says with a smile.
This amount is then used periodically for a treat that the family chooses, whether that's a movie or a round of miniature golf. Whatever you decide, the key is to be sure that you make the expectations clear from the beginning.
Do they need a bank account? Not necessarily. But with the prominent use of debit and credit cards for purchases, money management is largely a matter of record keeping. A simple no-fee savings account can provide good training. As your children get into their teen years, you can even pay their allowance by check, suggests Coulman. "At some point, they have to learn the ATM card is not a magic money card."
And as parents are often reminded, teach by demonstrating and offer guidance. "Involve them in family money," says Jensen. Let your children track the grocery bills for a few weeks, or see your vacation fund grow as you contribute to it. Their allowance then offers a prime opportunity for them to put what they've seen into practice. And ultimately, this will teach them the best lessons about money management. As Coulman sums up, "It's a different feeling when it's your own money."
Just as there are a number of reasons to give your children an allowance, there are reasons to withhold their allowance and parents need to decide what the criteria will be at different stages.
If expectations have been clearly set, you need to be firm about not paying the allowance if those tasks are not done, or are done poorly. But as a caution both Michelle Jensen, parenting specialist with Parent Resource Center in Ashland, and Randy Coulman, a Medford-based volunteer budget counselor through Crown Financial Ministries, point out that you need to know what motivates your child. If losing their allowance isn't going to encourage them to get the work done, you may need to consider other options.
When your child begins earning their own money, Coulman recommends weaning them off their allowance. "By the time they leave home, they should have had experience in managing income." Alternatives to cutting the allowance may be increasing their responsibilities, i.e. adding clothing or car costs to their expectations.
Some parents continue giving an allowance or frequent cash gifts after their children have left home. And while this may be a choice you make while your children are in college, Coulman cautions against supporting adult children. "Frequent gifts artificially inflate their income and encourage them to live beyond their means." And as Jensen points out, "When they're out of the house, it's time for them to take responsibility."