Does Money Grow On Trees?
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 the 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. 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. Most parenting experts however, 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. Try not to give your children money for performing an expected task such as cleaning his or her room. Instead, tell them that they can earn money by doing extra household tasks beyond the usual chores.
What’s the right allowance? Try tying the amount to age, about $1 per year of age per week. Another strategy is to base the amount on what your children are getting from you now as you pay for the kinds of things that 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). 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. 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 move up to making small withdrawals.
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.
For additional resources, there are several children’s books that focus on money and spending:
- The Kid’ s Guide to Money: Earning It, Saving It, Spending It, Growing It, Sharing It, by Steve Otfinoski. With an easy informative tone, humorous drawings, and kids’ quotes about money, this book explains the fundamentals of how to thrive in the American economy (ages 9 to12). The author focuses on the joys of work, but also provides explanations of banks, budgets, careful consumerism, taxes, investments, and charitable donations.
- Spending and Saving (Welcome Books), by Mary Hill. Hill also wrote five other books focused on specific denominations of money: Pennies, Nickels, Dimes, Quarters, and Dollars.
- What is Money, Earning Money, Spending Money and Saving Money, by Mary Firestone. These four colorful books are designed to teach younger children (ages 4 to 8) basic facts about the value and history of money.