Today, 70% of parents report that they give their kids an allowance. And while many of those parents use it as a reward for doing everyday chores, experts suggest using a weekly allowance as a teaching tool; a way to help kids learn about budgeting and strategic planning.
Beth Kobliner, author of Make Your Kid a Money Genius (Even If You're Not), recommends that parents not tie an allowance to household responsibilities. “You want your child to understand that being part of a family requires doing some tasks for which you will not be compensated—say, stacking the dishwasher and keeping your room clean.”
Kobliner recommends giving $1 a week for each year of age. (So a 10-year-old would get $10.) Or, work out what you expect them to pay for—say, snacks at school or new app download—and figure the right amount from there. Then, as your child gets older, have her start covering larger purchases you'd normally make.
For example, let a teen manage the $300 you've budgeted for back-to-school clothes. If your kid spends his funds too fast, leaving himself no money for gas, he'll be reminded each time he takes the bus to school the rest of the week.
Jennifer, mom of two boys ages 14 and 12, has developed a system for their allowance. Her boys can both earn up to $20 per week for doing good deeds outside of their usual weekly chores. This includes helping a friend or neighbor, helping with evening meal preparation, or being exceptionally kind or courteous.
“Keeping their rooms clean, practicing their instruments, helping with laundry, and getting good grades are expected,” says Jennifer. “Their allowances are based on behavior that’s above and beyond what’s expected.”
Jennifer has provided each of her boys their own debit card, in their own name. “That way, they’re able to use it online and, in the event they get hacked, it won’t affect my main account.”
In the end, teaching your kids good financial sense doesn’t end with allowance. Conversations about budgeting and spending, maintaining open communication, and looking for ways to involve kids in financial decisions are all going to help frame their thinking about money.
Opening a savings account for your child is a great motivator for them to do well financially, too, as is modeling good financial habits. As your children grow, set an example for how to stick to a budget, know about your credit score and more.
Remember, it’s never too early to instill good spending habits.