Kid’s Allowances : Are You Doing It Right?

Kid’s AllowancesThe topic about kid’s allowances has baffled a lot of parents and adults for years and has been a cause for debate. On one side, there are parents who believe that giving children money will only be detrimental to how kids perceive money. They believe that children need to earn it the hard way to be able to equate hard work with money.

Then there are parents who are would point out the value in providing children an allowance. A lot of them even goes on to explain how the value of having three containers for saving, spending, and giving help them teach kids the importance of money management. The containers are used to mimic real-world applications and uses for the money.

Kid’s allowances enables them to learn the art of saving in an economy that is nudging them to spend. It also teaches them to spend and understand need from want. It also gives them early lessons in generosity as well as appreciation of the things they have at present. Some parents also believe that as debt affects children in the family, it is better if they get to experience how it is to manage finances.

Most of the discussions revolve around tying allowances with chores. There are some experts who believes that this sends out the wrong signal. They believe children should learn that they need to do things for the family. For some parents, it simply works for their children. Whatever the case maybe, giving out kid’s allowances should be done methodically and not just on a whim. This will help children understand the financial lessons embedded in the routine. Here are some of the ways you can do it correctly.

Age appropriate amount

This is one of the many questions parents have when it comes to giving children allowances. What is the most appropriate age for children to start getting their own money? Giving it too early could undermine the whole educational aspect of the process. Choosing to do it later as the kids grow up could make the process a little harder as influences in their life becomes varied.

The Baby Center shares that the best time for kid’s allowances is when they know that money can buy things they want. This is because at the moment, you are providing all their needs. Once they start to realize that money is a great tool in getting that toy, candy, shirt, or even a game, it is a good time to start putting serious thoughts in allowance money.

Accommodate it in your own budget

CNN shared that over 50% of Americans do not have savings to cover about $500 worth of emergency. This puts into question budgeting and money management. Of course, it is not to say that income levels do not play a part in it. However, there are a number of consumers who are able to work with a shoestring budget.

That being said, it is important to be able to include the kid’s allowances in your own budget so you do not come up short when handing them out. Or worse, other critical areas in your own budget could be affected. This is because as you give out allowances for your children, you might be surprised with the amount they accumulate over time.

One thing you can do is to keep track of what you promised them and where they are at different times of the week. The most practical solution is to put a cap on the amount every week so you do not go over budget yourself.

Set guidelines

In anything in life including kid’s allowances, you need to set guidelines so you can manage expectations. Your children know what they have to do to get the allowance. It can be exercise or even helping out around the house. Some people share that they do not equate allowances with chores. This is because children would grow up not wanting to do anything for family if they do not get paid.

This is why their allowances are being given out for activities that are done after they do their chores. It is actually a great way to help children understand that there are things you do for family with or without compensation. After they have washed the dishes or taken out the trash, then they can start getting into extra curricular activities to earn their allowances.

These guidelines should also extend with how your children use their money. Just because it is their allowance it does not mean they can buy whatever they want. They can buy games but not the violent ones. They can buy food but guide them in getting healthier ones rather than junk foods or those that are just filled with sugar.

Let them choose

As you set guidelines, you also have to let them choose on what they are allowed to spend on. This freedom gives them the ability to practice money management at an early age. They now start to think about their purchase. There are times they might look at the item they are going to buy and if it is worth it considering everything they did to get the allowance.

There might be something better they want but the money they have at present would not be enough. Do they save up and wait for a few more weeks or choose something else? Letting them have a free rein on how they will use their allowances teaches them accountability as well. Their own decisions will directly affect the money they have on hand.

Speaking of money on hand, kid’s allowances are best given out with cash. Children nowadays might ask for online credits so they can simply order the things they want or buy that game online. However, letting them hold on to cash and paying with the same gets them to realize how money is used. They see, feel, and even smell it before it is paid to a merchant. As this happens, they can develop that sense of putting importance to it because of the work they put behind it. Rather than just online credits where they just see a bunch of numbers which quickly goes out as payment, cash helps them appreciate actual money.

Allow them to make mistakes

A lot of people make money mistakes regardless of age and background and you should let your children do the same with their money. Kid’s allowances are meant to help them teach money management at an early age. Part of the process is making mistakes along the way. The important thing is learning from the experience and making better decisions in the future. It is better they make mistakes and learn from them with their allowances today than big amounts in the future.

Be consistent

One of the key things you need to keep in mind is to be consistent with your kid’s allowances. From the rules you set at the beginning to the amount you are going to give them and even when you give it out. This helps your children manage their allowances better knowing what to expect and being able to plan for it in the process.

Guide them through the process

The idea behind the allowance is to help them learn financial management early on. As such, you need to constantly guide them and explain things to them. As mentioned earlier, let them make mistakes but be there to help them understand what went wrong and how they can fix it. Also, try to make it fun for them. It helps them understand the lessons in it if they are having fun.

Kid’s allowances is a topic for debate for a lot of people and it simply boils down to putting together a set of rules with it. You cannot simply just give them money and hope they learn on their own. You need to invest time and effort as well to help your children learn how to manage their finances in the future.