What’s the best way to give a child an allowance? Some parents attach allowances to chores: children contribute to family household efforts and are rewarded. If they don’t do their chores, the allowance stops. Other parents, and most parenting experts, believe that family responsibility around the house should not be connected to allowances. If children don’t do their chores, a loss of privileges would probably be more appropriate than taking away an allowance.

What’s the right allowance?
Some suggest tying the amount to age, about $1.00 per year of age per week, or determining the amount based on what his or her peers are getting. Another strategy is to base the amount on what your children are getting from you now as you pay for the kinds of things they would buy for themselves. That amount becomes their allowance and now they can make their own purchasing decisions.

Or you might want to increase the amount to try and encourage saving. A common recommendation is to encourage children to divide their allowance into thirds—a third to spend, a third to save, and a third to share with others in need. And divide savings into short-term savings (a special toy or trip to an amusement park), and long term (spending money for a special family vacation or college).

Remember, the purpose of an allowance is to give your children the opportunity to learn how to manage money through their own successes. Every parent has to find a balance between guiding for success and allowing children to make mistakes that we know might lead to tears or heartbreak.

The best way to get money is to earn it.
Opportunities to earn money are an important part of learning about money. Try not to give your children money for performing an expected task such as cleaning their rooms. Instead, tell them that they can earn money by doing extra household tasks beyond the usual chores, opening a lemonade stand, or doing jobs for neighbors.

Older children may be ready to open a personal savings account at the local bank. You can set regulations with your children about their account. For instance, they may want to start by making only deposits into the account, and gradually moving up to small withdrawals.

It is also fun for children to talk to their grandparents about the cost of things such as a haircut or a chocolate bar decades ago. Activities like this help our children learn how much the value of a dollar can change over time. And don’t forget to remind your children that a dollar sign can’t be placed on many of the most important things in life such as a good family, happiness, and love.

Related Parent Resources:

• Family Collection Jar and Job Responsibilities are simple Learning at Home Ideas from our education team.
• Read about how Modern Mom teaches the value of money in her post—Volunteering with Kids—in our Mom to Mom blog.
• Planet Orange—a website by Ing—helps teach children about money and responsibility in an interactive, engaging and fun way.
• FamilyEducation’s Kids and Money page has valuable articles on the topic.
• Moonjar.com has children’s products and helpful tips on saving, spending, and sharing.

Related Book Resources:

• The Kid’s Guide to Money: Earning It, Saving It, Spending It, Growing It, Sharing It, by Steve Otfinoski.
• Spending and Saving (Welcome Books), by Mary Hill.
• What is Money, Earning Money, Spending Money and Saving Money, by Mary Firestone.

Originally published on Bright Horizons