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When to Start Giving an Allowance to Kids?
20 03 06  16  17
-------- Never
 (AllThingsFinancial is hosting the Carnival of Personal Finance this week. He also inspired this article with a similar one he published not long ago)
Never. That is my position. Kids should learn the value of money all right, but they should also learn that money doesn’t come for free – at least not to responsible people.
I believe kids should be able to earn money and learn how to spend it. Kids should be able to learn that this is a world of limited resources and that you can probably have anything you want but not everything you want. Kids should also be allowed to make some small financial mistakes while they are Kids, so that they learn to avoid them when they are grownups.
I suggest parents give kids the opportunity to earn money. They should have plenty of opportunities so that they can choose which ones to try – or to try them all. They should also be plenty enough to cover for normal things that kids want – you do not want them to discourage them. Some suggestions:
- Excellent Grades. While parents have all the right in the world to expect kids that earn A’s and B’s at school, they should reward exceptional behavior. An A+ should be rewarded: a few dollars will do the trick, and the kid will try to bring more A+ to get more.
- Exceptional Performance. Extend the prize to other things. Teach them the value of excelling at anything they do. Give them small token prizes when they do superbly at little leagues or art classes. However, don’t give the money freely, give it only according to pre-agreed goals.
- Prize for Saving Money If you pay $5 for a machine done car-wash, why not pay $5 for a kid done carwash?
- Gathering money Some states return the deposit on beverage cans. Collecting them, bagging them and remembering to bring them back to the supermarket is a chore by itself. Offload yourself of that chore and suggest your kid that he/she can get all the money from the recycling. Have a pile of old books that you are about to trash? Have your kid list them on eBay and pocket the earnings. Need to clean out the attic? Have your kid host a yard sale and pocket the earnings
- Extended Education Pay them to read a book and do a book report on it. Show them that education pays – right from the start
- Savers Credit Suggest they fund their own Educational IRA. Give them a Savers Credit (money) for money they deposit on their own, tax deferred, protected account.
Kids should also understand that this is no replacement for tasks they have to do anyways. No money should be awarded for cleaning out the room, or washing the dishes, or good behavior at church, etc. Also, parents should understand that they do have some legal responsibilities that they can’t offload to kids: you must feed and clothe kids when ether they spend all their allowance/earned money or not! The couple of dollars you give a kid for lunch at school every day is not an allowance – its feeding. However, don’t give away more than what they need to eat a healthy lunch. |
