What is an appropriate allowance for your child?

The development of allowances continues. How do you know how much to give? Here’s a breakdown.

In the age of everything digital and mobile, it should come as no surprise that even something as old-fashioned as child support has evolved. Here’s a look at the new rules for granting allowances to your child and what you need to know to navigate the often complex process.

Luckily, one of the things that makes it easier is the fact that more parents are talking to their kids about money today than ever before. This emerges from a current report Survey on parents, children and money from T. Rowe Price, which found that 49% of families talk to their children about finances. While we would like the number to be 100%, knowing that about half of all families are having these conversations is good news. Children need to learn financial skills, and starting them at home paves the way to lifelong money literacy.

In addition to speaking, children also need direct practice in dealing with money and making decisions. What is the best tool for this? An allowance, says John Lanza, author of “The Art of Allowance.”

Lanza says effective money education has three parts: direct instruction, parent modeling and providing children with money experiences. “Teaching children about money is an opportunity to instill your values ​​about what you think is important, whether it’s thrift, paying yourself first, or giving to charity and how much,” he says. But children also have to make their own decisions and mistakes. This will be more popular than a parental lecture – and that’s where an allowance comes into play.

Beth Kobliner, author of “Make Your Kid a Money Genius (Aven if You’re Not),” recommends what she calls the 4 Cs when providing pocket money: Be clear about what the money is for consistent about giving it, using it Checkout (more on that in a moment) and don’t tie it to it Homework. She also recommends a fifth C: controlThis means that your child should have control over their cash – with a little help from mom and dad, of course.

Many parents have strong opinions about not giving what they consider a “charity,” especially when finances are tight. The most important thing is to find what works for your family at any given time – there is no “perfect” way to handle an allowance, and if it’s not in the budget, there are countless ways to teach money lessons for free – More on this below!

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The argument for not tying an allowance to regular housework

Pocket money is a tool for learning about money, says Lanza. The goal is to open positive conversations about the skills you want your children to learn. “If you tie pocket money to housework, you’re ensuring that pocket money is used in a punitive way,” he says. What happens if your child skips his assignments? Does the habit of rushing just to get paid develop? “There’s a kind of cloud hanging over the conversation,” he says. Focusing on tasks shifts the conversation away from financial literacy.

This doesn’t mean that your child doesn’t do chores or that he or she doesn’t learn the value of work. “Doing unpaid household chores encourages your child to develop internal motivation that will help them later,” says Kobliner. Learning about money and housework is important, but kids learn something different from every conversation, and it’s easier to convey those lessons if you keep them separate.

It’s also perfectly fine to pay for optional tasks beyond that – things like cleaning the garage, shoveling snow, or raking leaves. Your child will have the experience of working for money and developing an entrepreneurial spirit. This is a different skill than helping with family chores.

When and how to receive an allowance

You can start offering your child an allowance earlier than you think, around age 4 or 5 or as soon as the child starts school. Some experts suggest offering around $20 per month, but you can offer more or less depending on the child’s age, the lessons you want to teach, and what you expect your child to do with the Paid money (you can give more). Years when you increase the things they have to pay for with “their money” and your family’s budget.

Lanza suggests having three jars for your child to store their money in – a “savings jar” to save money for the future, a “spend jar” for money to spend now, and a “share jar.” for charitable donations. Let’s say you give your 5 year old $5 a week. That could break down into $1/save, $3/spend, and $1/share (20%/60%/20%). The aim is to give the children enough pocket money so that they have purchasing power and freedom to make decisions, but also develop the habit of saving and giving regularly.

The added benefit of the glasses? It takes the pressure off of you from the driver’s seat when you’re standing in line at the grocery store getting requests for comics and candy. Once you’ve set rules for the categories you don’t want to cover, let your kids decide what they want most – it’s their allowance. And they’re often much more responsible with their own money than with your own, says Lanza.

Plus, your kids will learn more about money if you do it the old-fashioned way and give them cash. They learn better through hands-on experience, with real bills and coins that they put in their jars. Kobliner recommends offering your child financial support while they are at school. Just make sure you switch to debit cards and apps before your kids leave home for college so they can practice using digital payment methods, Lanza says. (Why is cash so important? Because Research shows that ditching cash makes us think more critically about our purchases than if we just swiped a credit card—and kids need to learn to deal with card temptation.)

Increase financial responsibility as you get older – if you can afford it

When children are very young, they use their little pocket money for extra expenses, and you probably won’t give them much. But once children reach middle school, Lanza recommends what he calls “breakthrough grants.” This is a larger monthly allowance that may come with greater responsibility, such as paying their share of the cell phone bill, eating out with friends, or buying new clothes. Every family behaves differently, so you can decide what is right for your family.

If a larger amount is beyond your means, remember that the goal here is not to add a large line item to your budget, but rather to shift some of your own expenses onto your child. (For example, buying gas for his car.) Start by tracking the expenses you want to give your child to determine an appropriate amount. The goal is for them to learn to make important decisions about their spending – don’t bail them out if they spend all their money at the beginning of the month or buy something they regret.

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Why allowances for children work

The real benefit of giving your child pocket money is the conversations it opens up for your family to discuss the value of money, payment for goods, and the difference between needs and wants. Introducing your children to financial literacy early on is the best way to introduce them to money management… and help you become more comfortable with it! Even if you’re not the best at managing money, you have the opportunity to learn something while out with your kids, and when you do, your own well-being grows.

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