One of the greatest ways to teach your kids the basics of money management is an allowance. There are lots of different ways you can approach allowances. Ultimately, your best choice is what works best for your kids and your family. In this article, we share some approaches that have worked well for many parents, and could be a good match for your kids. Choose the ones that best fit your goals for your kids.
What age to start allowances?
The best age to begin giving your child an allowance is when they start understanding money, its value, and how it’s used. Many kids are ready when they’re 3-4, and many when they’re 5-7.
One way to approach it is to ask them questions about money to see what they know and understand. For example, ask them if they know how many quarters are in a dollar, and how much they save spending $3 instead of $5. When your kids understand money, they’re ready for an allowance.
How much allowance per age?
Many American families tie the allowance amount directly to the ages of their children. For example, a four year old gets $4, and an eight year old gets $8. Of course, how much is given “per age” depends on the parent’s financial situation and what they can afford.
In addition, most parents want to choose the amount they feel their children will handle responsibly and fits their age and purchasing habits. A grade-schooler will tend to buy candy and toys, while a high-schooler usually spends money on gasoline, clothing and entertainment. So as children get older, they’re more responsible with a bigger allowance.
How often to give allowances?
The best approach to giving allowances is to do it once a week, on the same day. This helps keep your kids on a good money schedule, and lets you interact with them about their allowance on a regular basis. The weekly handout helps you give your kids financial advice, discuss how they’re spending their allowance, and encourage them to make wise spending choices.
Should you require savings?
Yes, it’s very beneficial to have your kids save a portion of their allowance. You can set up a specific amount, and require them to meet it each week. This is a great way to help your kids learn the benefits of saving, and get them into the habit early. You can set up a bank savings account for them, or simply have them add their savings to a piggy bank. Then each month, you can show them how their savings are growing, and how they’ll have more money in their future, which will make them happy.
Some parents require their kids do certain work around the house – mow the yard, clean their bedrooms, do dishes, etc. to earn their allowances. And some parents require their kids to get high grades in school.
For many families, these approaches inspire and motivate kids. But in other families, they don’t. It’s up to you to decide what will work best with your children.
A 2012 survey by the American Institute of Certified Public Accountants (AICPA) found that 61 percent of parents give their children allowances, most starting by the time children reach age 8. It’s a great approach to helping them develop financial skills, and be an even more influential part of their lives.