Allowance: How to Have Harmony, a Clean House and Savvy Kids

daughter-allowanceOf all of the mini-polls taken between parents about parenting skills, tools and decisions, one of the most frequently visited is that of allowance.

The conversation usually starts along these lines: Do you give your kids allowance? How much? What do they have to do?

Truthfully, awarding your children allowance can offer major benefits. You teach your kids about the relationship between hard work and earning money. You embrace a real-life teachable moment with lessons that could set your kids up for success in their adult lives. Oh yes- and you get some assistance with your household chores.

There are a number of points to consider when setting up your reward program:

How Old?

While there are differing opinions on this particular question, a good rule of thumb is when kids are able to understand that their parents purchase items in exchange for money, they are ready to learn about the whole earn-receive-budget-save-spend cycle, in an age-appropriate way.

For most, this usually happens around 3 or 4 years old. But you know your children best- and there is no hard and fast rule on this.

Salary Expectations

So, how much should you pay your kids? This is another one of those questions that invites a wide and varied response.

A popular choice is to set allowance based on an amount that equals the child’s age on a weekly basis (.50 cents, a dollar or whatever you deem appropriate per year of age). Another way to do it is to set an allowance based on your own budget, and on how much money you allocate on a weekly basis your child’s “needs” vs. “wants”. Some parents have older children submit their expectations for discussion (as in, I would like x amount, to spend on these items, and this is what I intend to do around the house to get this).

Whatever method you employ, the amount should never be so substantial that a child could go out in a given week and buy whatever they want. You lose the impact of the lesson on earning and saving up.

Choose Chores Wisely

Again, make sure that your chores are age appropriate. Recognize differences between different children as well.  Different kids will take to certain chores and some will not. Let them voice their opinions about some preferred chores, but you ultimately decide.

When setting out allowance take into account the time it takes to complete a chore as well as the frequency. Folding laundry or vacuuming can take a good chunk of time, but is done less frequently. Taking out the garbage or making your bed are quick jobs, but require daily commitment.

Employ an Spend and Save Policy

Whatever amount you decide to dole out to your darlings, make sure their weekly allocation is split three ways- to really drive home the money management lesson here.

Employ a spend/save/give away split.  Set a portion of weekly earnings for spending, for longer term saving and for charity. For younger children, physically split the money between three jars so that they can fully grasp the concept.

Supervise their spending. Encourage them to save up for a coveted item that is a little pricier. Let them choose a cause that matters to them to receive their donations.

This money habit, if adopted and regularly followed, will go far to instill an innate sense of responsible money management as these kids grow into adults.

Win as a Team

Another approach, if you have multiple children, is to encourage them to work as a team to get chores down around the house. You are responsible for supervising, but make them responsible for splitting tasks and completing them. Money earned can go towards a common goal that can be enjoyed as a family (a special outing, recreational equipment or game, for example).