Giving your kids an allowance is a big decision, which means you’ll need to seriously weigh the pros and cons of an allowance for kids.
If you’re trying to decide whether using an allowance is right for your family, keep reading to learn everything you need to know about giving kids an allowance.
Why Kids Should Kids Get Allowance
The question of whether or not kids should get an allowance often sparks a debate among parents.
While some families believe that an allowance isn’t right for them, others wonder if their kids could benefit from a weekly stipend.
If you’re on the fence about giving your own kids a weekly allowance, here are some benefits to consider.
The biggest benefit of giving your kids an allowance is the opportunity for them to get a hands-on financial education.
When your kids earn their own money, they can put the concepts of saving, spending, and giving into action.
Your kids can learn they need money to purchase the things they want.
And they’ll quickly see that they need to save their money to make bigger purchases.
As your kids start to see that saving is an important part of life, they’ll also start to grasp the importance of goals.
When they find an item they want to buy but can’t afford, they can set a goal for themselves to save up to make that purchase.
Learning wants vs needs
Most kids see everything as a need. They might think they need a new toy or video game when you’re the one buying everything for them.
But once they start spending their own money, they’ll begin to see that the things they thought they needed aren’t all that important.
This will help them distinguish between the things they need and the things they want, which is an important distinction they can take into their adult life.
Creating a connection between work and money
If you decide to connect your kids’ allowance to their chores, they’ll also get a lesson on the connection between the work they do and the money they earn.
Since this lesson can be taken into their adult life, it’s a good way to help your kids develop a good work ethic at an early age.
One of the biggest questions parents ask as they’re thinking about giving their kids an allowance is, “How much should I give my kids for allowance?”
There are a few different ways you can come up with an amount to give your kids each week.
Method 1 – Age Based
One popular method for coming up with a total amount to give as an allowance is to use your kids’ ages to determine how much they’ll get.
This age-based approach is a simple method that can help you come up with an allowance that works for your family.
When using the age-based method to calculate the total allowance amount, most parents give their kids $1 per week for each year of age. So, if you have a 12-year-old at home, they’ll receive $12 per week.
Method 2 – Chores Based
Another popular method for paying an allowance is to use a varying approach.
This method works well for parents who are considering tying chores to an allowance.
When using this method, you could assign a dollar amount to each chore, then pay your kids based on the number of chores they do.
And if your kids don’t complete their chores, they don’t get an allowance that week.
How Much Should a Child Get for an Allowance?
Using an age-based approach to coming up with an allowance amount is a great starting point.
But it’s also a good idea to take a few other factors into account when coming up with the amount you’ll pay your kids.
While using their age as a base, it’s also important to think about:
- Your budget. Before you can come up with an allowance amount for your kids, it’s a good idea to see what you can afford. Take a look at your budget to see how much flexibility you have in your own finances before committing to an allowance amount.
- Cost of living. Another outside factor to think about is the cost of living in your area. If you live in a place where the overall cost of living is high, you may need to think about increasing the total amount of allowance you give to your kids. When using an age-based approach, it may be a better idea to increase the base amount to $1.50 or even $2 per week per year of age. That means your 12-year-old could earn between $16 and $24 per week using this new calculation.
- Chores. Many parents tie their kids’ allowance to chores, so considering how chores will fit into the amount you pay each week is important. When thinking about the connection between chores and allowance in your own home, ask yourself whether your kids’ allowance will be dependent on chores. Will you give them an allowance if their chores aren’t completed? What happens if they do some, but not all, of their chores? Will you give them a flat rate each week or pay per chore? The answers to these questions will help you come up with a better idea of how chores will impact the amount you give your kids in allowance each week.
When Should I Give My Child an Allowance?
There’s no specific age that you should start giving your kids an allowance. But the sooner they start learning about money, the better.
Since there are so many great benefits to an allowance, it’s beneficial to start the process early.
Sticking to the age-based allowance method for younger children is a good option – especially if you haven’t started incorporating chores into their daily routine.
As your kids get older, you can adjust the amount you give them each week based on their age and/or the chores they do.
Ways to Give an Allowance
Now that you understand the benefits of an allowance and how much to pay your kids, you’re probably wondering what the best way to give an allowance is.
There are two different ways to pay your kids. And each has its benefits depending on your kid’s age and experience with money.
When you first start giving an allowance, paying your kids cash is a good option.
Having the bills and coins physically in their possession is a great way to help them learn to manage their money.
That’s because they can easily see and count the money, making it simpler to know how much they have on hand and how close they are to reaching their savings goals.
As your kids get older and become more familiar with managing their own money, opening a bank account in their name is a good idea.
Since most purchases are made using a credit or debit card these days, giving them the ability to make purchases online with the help of a bank account is a great idea.
If you opt for this payment method, it’s important that you teach your child how to track their spending within their bank account.
And don’t forget to warn them about the fees and penalties that come if they spend more money than they have in their account.