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Most financial experts agree that children should be given an allowance in order to learn financial skills at an early age.
Janet Bodnar, deputy editor at Kiplinger's Personal
Finance, defines an allowance as a fixed amount of money that children get at
regular intervals in exchange for certain financial responsibilities that they
take on. "Giving your kids an allowance is the best money
management tool you can use with your children," Bodnar says. Have
you ever noticed that children will spend unlimited amounts of money as long as
it's yours? "When it's their money on the line, children make
more informed purchasing decisions," Bodnar says. The problem
is that most parents resist giving children an allowance and, if they do, they
usually give the children too little. If the allowance isn't large enough for
children to experiment with -- to make mistakes with -- it won't have the learning
effect you'd like it to have. How young
is too young?
As soon as your child begins to express a sincere interest
in material wants (as in, "I want that!"), it's time for an allowance. Depending
upon the child, that's probably around the ages of 3 to 5. The
first mistake most parents make is starting too late. The majority of parents
wait until their children are tweens (9 to 12 years old) and they miss out on
the opportunity to discuss money with young children who are more apt to listen
to, and take, their parent's advice. By the time kids are teenagers, they have
additional influences on their spending habits, including friends, advertisements,
pop culture and the media. How much is
too much?
Usually the first question parents ask is, "How much allowance
should I give my child?" Some experts recommend a weekly allowance that totals
a dollar for each year of the child's age. But, rather than base a dollar amount
on the child's age or giving the same amount that other parents are giving their
kids, make an informed decision based on what you expect your child to do with
his or her allowance. As your child gets older, she'll have
to take on more responsibility for her spending habits as her allowance is increased.
Decide as a family what the allowance is to be used for. Will the child be expected
to purchase movie tickets, clothes, birthday gifts for friends and school lunches
with the weekly allowance? If so, the amount has to be high enough to cover those
expenses. Then, if the child runs out of money by the end of the week, she won't
have money to go to the movies or to the mall on Friday night. Tying
allowances to chores
Most financial experts agree that linking the
allowance to the completion of chores is not the best approach. "My
recommendation is to keep the allowance totally separate from the chores," says
Aletha Solter, a developmental psychologist and founder of The Aware Parenting
Institute in Goleta, Calif. "That way, children will learn the value of cooperation
and experience what it feels like to contribute to the family." In
addition, once children have other streams of income (monetary gifts for birthdays
and holidays or a part-time job after school), they often balk at doing chores
at home in order to earn their allowance because they are no longer dependent
on Mom and Dad for income. Giving extra money for bigger chores
-- not those that you expect your child to do daily or weekly -- is fine. For
example, if Dad usually pays to get his car detailed once a year, he might be
willing to pay for that task to be completed by someone in the family. Or, if
the children help with the annual "spring cleaning" of the garage, that might
be worth greasing the palms of helping hands. | 
