Money & Career
An Allowance Allows Real World Money Lessons
5/1/2020 1:00:00 PM

Allowance


As summer begins, kids will have more things they want to do and places they want to go during the break – especially as shelter at home orders are relaxed and they gain back some freedom. Most of these will cost money, making summer a great time to consider an allowance system if you don’t have one in place already. 


There are many different schools of thought when it comes to giving children an allowance. Some parents believe an allowance should be tied to household chores; others argue that doing household chores should be viewed as a child’s contribution to the family, not as a money motivator. Some pay out weekly, while others dole out on a monthly basis. Some say five bucks is enough; others say ten. 


When it comes to the logistics of allowance, there are no right answers – the method of developing a family allowance is an individual decision that depends on the personal values and budget of each family. However, one thing is for certain, according to Jamie Schiro, Vice President/Market Manager with Lakeside Bank:  An allowance should not be viewed simply as a fistful of dollars given to a child to spend impulsively. Instead, she says it should be viewed as an opportunity to teach invaluable skills about money management.


"Many parents hand over a few dollars here and there when their child asks for it,” she says. "That money quickly disappears down the hall and out the door, with no discussion about how it is spent – or saved.” 


Research shows that the financial lessons kids learn in their youth usually carry into adulthood. "If they understand that saving and being responsible with their money is important,” says Schiro, "it’s more likely they’ll develop good money management skills in adulthood. Helping them manage their allowance is a great hands-on way to start them off with a strong foundation.” 


When giving children an allowance, Schiro recommends giving the money in denominations that encourage saving. "For example, if the amount is $5, give them five one-dollar bills and encourage them to set aside at least one dollar in savings. For children who are old enough, the best way to encourage them to save is take them to the bank so they can open their own bank account as soon as they are old enough.” 


Opening the account can also help parent and child develop a budget together. If your child loves $40 video games, for example, that can be worked into the budget, just as the parent would work household expenses into the adult budget.

Another aspect of allowance that often goes overlooked is the opportunity to teach charitable giving, Schiro says. "An allowance presents an excellent opportunity for parents to teach children how to support causes that they believe in and give back to their communities. Even little children will have an idea of what’s important to them. Once you’ve had that conversation, search for charities that are in line with what you’ve discussed and show them how to make a contribution. Whether it’s a donation to their church, a pet shelter or a local food bank, it helps your child realize they are part of a larger community and they can play a role in the welfare of that community.”

Posted by: Kristy Armand | Submit comment | Tell a friend

Categories: Finances

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