Kids Allowance
Should They? How Much?

Deciding on how much you should set aside for your kids allowance, or even if you should give an allowance at all, can be a tough decision to make as a parent.

Some parents believe that starting a child off with a small weekly allowance helps them to develop good money management skills at a young age. The opposite side would argue that giving a child money for nothing doesn't encourage them to place value on the cash that was given. Instead, they just start to see their parents as their personal ATM machine.

Let's delve a little deeper into the pros and cons of giving your child an allowance.

Helping Kids Learn About Money

The biggest and best argument for giving an allowance is to help kids understand how money works. Should you choose this path, you will need to take a few factors into account when deciding on the amount of money to give and how it will be used.

The allowance should be:

• Less than the amount the child needs to buy everything they might want.
• Given in exchange for work of some sort whether it is doing acceptable work at school or chores around the house doesn’t really matter.
• You should require your child keep track of their spending in some way so they can identify to you where the money goes.

Just giving a kid allowance is not enough to constitute a viable financial education. You have to actually show them how to use the money properly.

The amount you give should not be enough to let the child buy whatever they want every week. Why? Because this teaches them to spend money on things that are important to them rather than developing a freewheeling let's buy everything in sight attitude.

Your child must learn that the money supply has limits. This can also help cultivate the habit of saving small amounts each week for a big purchase later. Be strict with this—don't cave in and hand out more money whenever the kids ask it.

The allowance should be given in exchange for doing something, such as household chores. This helps cultivate the knowledge that in order to get money, you have to first create some kind of value.

The last point is to create a consciousness of what your child is spending money on. This stops her from becoming the type of person who just lets money "slip through the cracks" all through life.

The Argument Against Giving Kids Allowance

The argument against giving children an allowance is usually based on the ideas that young kids are not responsible enough to handle money, no matter how well educated they are. The argument carries on by saying that giving kids money before they have a job doesn't teach them that money only comes to them as a result of work.

These issues should all be avoided if you stick to the points given above. If you follow the advice given, you will create more realistic conditions about how money is obtained and used for your child. They will learn to work for money and that supply of money is limited.

Generally speaking, giving kids allowance with some attached conditions is much more effective as a financial education than opening your wallet every time they need to buy something. When you receive an allowance it puts a limit on your spending power and forces you to realize the value of money.