Many parents contemplate giving their children an allowance, and for good reason. Allowances are an excellent tool for teaching children how to save and manage money while they are young.
When giving kids an allowance, there are many things to take into consideration. One of the first things parents need to establish is what age their kids get an allowance.
What age should kids be given an allowance?
The age kids are given an allowance depends on a number of things, but most experts recommend that parents start giving their kids an allowance between four and five years of age. Why? At this age, kids are old enough to understand the basic concepts of saving, spending, and money management. In addition, many experts find this is an ideal time to start because at this age, children are more apt to take their parents’ advice when it comes to saving and other money management skills.
Waiting until kids are ten or eleven, when many parents begin giving an allowance, has a number of drawbacks. By this time, they tend to want more (and more expensive) things than younger children, so money tends to burn a hole in their pockets. They do learn by trial and error the importance of saving, but many times, children who were taught this at a younger age have a better grasp on the concept by the time they get to be tweens.
Whatever age you decide, take your kids to a bank or credit union to open up a savings account so they can watch their money grow and know where it goes when they are saving it. As they get their statements each month, review them with them. Even young kids can understand the basic principle behind interest.
How much should kids get in allowance?
The amount you decide to give your children in allowance depends on a few things. How much you can afford should certainly be taken into account, but if you give your kids too little, they will not have enough money to learn the important lessons that come from managing money. Many people recommend you give the child a dollar per year of their age per week. At this rate, kids have enough money to save as well as spend. And as kids get older and have more expensive tastes, they have the money to cover that.
What conditions should be given with an allowance?
There are other things you may want to consider when it comes to an allowance. For one thing, whether or not you want your kids to earn their allowances through chores. Some parents prefer this as an incentive for kids to do their chores while at the same time keeping kids from thinking they are entitled to money from their parents. While this may sound like a good idea, many experts discourage having to work for their allowance because it may make them less likely to help out as they get older and have other sources of income, and it deprives them of the valuable lessons they learn about contributing to a family. You may also want to require that your kids save a certain percentage of their allowance as well.
The age kids get an allowance is completely up to the parents, but giving an allowance at a younger age helps pave the way for smart money making decisions as they get older.