The following tips can help you smooth out the details when it comes to deciding if an allowance is right for your kids. If it is, there are some great ideas to help you crunch the numbers to help you figure out why it’s okay to give your child an allowance.
First things first...
According to a survey by the American Institute of CPAs, 61% of parents pay an allowance, and more than half of them start by the time a child is eight years old.
The question is: Should your kids get an allowance? Only you can answer that…
To help you decide, consider the following points:
An allowance can help kids:
- Learn responsibility
- Develop an understanding of how much things cost
- Learn how to save and budget for things they really want
- Make more intentional choices about how they use their money
On the flip side of the coin, some parents believe that kids will begin to expect payment for anything they do around the house. If that’s the case, you may want to consider paying them an allowance without tying it to specific chores.
Crunching the Allowance Numbers:
If you decide that an allowance is a good tool for teaching kids smart money habits, the next question is: How much? That answer depends on what’s right for your family, your budget and your values.
Here are some guidelines to help you set a rate:
Age = $: Consider giving your kids an allowance equal to their age or an equivalent formula. For example, you could give your 10-year-old $10 a week or every two weeks, or you may decide that 50 cents multiplied by your child’s age is an appropriate amount, such as $3 a week for a six-year-old.
Make a proposal: Ask your kids to suggest an appropriate amount. Based on that proposal, determine what amount matches your budget and your values. Plus, your child can learn important negotiating skills in the process.
Don’t pay for “chores”: Some experts recommend keeping allowance and chores separate. The rationale is that kids should help out simply because they’re a part of the family. A happy medium is to pay kids a base allowance that isn’t tied to routine chores (like making their bed or taking the dog for a walk) but also to reward special tasks, like washing the car.
Cover “needs” vs. “wants”: Determine what you expect the allowance to cover. Tally up those items and their associated costs, then share the list with your child, along with the allowance you’ve decided on. If you have older kids, you can use this need-based allowance calculator together to help settle on an amount.
Dare to compare. Some parents like to give their children the equivalent in today’s dollars to the allowance they received at the same age. An allowance calculator can help you get an idea of how much to pay based on factors like your child’s age. You can then compare the “purchasing power” of today’s allowance with what you received as a child.
Written by Mary Thoele
This blog post is from the Author's perspective and doesn't speak for brightpeak financial. Contact brightpeak if you want to know more about brightpeak products, and keep in mind that they are not available in all states and there are some limitations (some exclusions and restrictions may apply).
