Allow It

Where there are chores, there is allowance…or is there?

With so many SavvyMoms inspired to work out a family chore schedule and get their kids helping out around the house this fall, we’ve been inundated with the next obvious question: “What about allowance?” So we set out to find guidelines on that front too.

A Penny Saved Is a Penny Earned: What’s It For Anyway?
Experts generally agree that allowance is a tool to help kids learn money management skills, not a reward for children who do regular family chores. After all, we don’t want our children to expect to be ‘paid’ for contributing to keeping the house neat and tidy. (It would be nice if we were though!) Apparently the only real way to learn money management skills is through trial and error—it’s not something kids learn in school. (Remember your first credit card?) And like most life skills, this is a gradual learning curve where an early start helps avoid more costly and emotionally charged issues later (think blowing allowance on candy versus blowing it on beer instead of textbooks).

Top Ups: What About Extra Money?
However, experts recommend children undertake extra chores as a way to earn extra money, thus teaching them the valuable lesson that if they work harder, they can get more of the things they want in life.

The Birth of Allowance: When Do You Start?
By age six, most children are ready to start learning about money—spending it, deciding what to spend it on, saving it and not losing it. If your child is starting to express interest in how much things cost and the fact that money can be exchanged for goods, she might be ready for an allowance.

The $64,000 Question: How Much Do You Give?
A common rule of thumb is to give one dollar per year of age per week. But the ‘right’ amount should consider the family’s financial situation (of course), what other kids are getting and what they are expected to buy with their allowance.

Allowance Three Ways: What Should They Do with It?
Having the freedom to spend their allowance helps kids learn how much things cost, to make choices among the many things they may want and to appreciate the things they buy. Help them set up a framework where they are required to:

• share a certain amount (birthday presents, donations to charity)
• save a certain amount (suggested range is 10–20%) for something more expensive they want (sporting equipment, iPod). You may need to help with a bank account or piggy bank, and tracking how much they have to make their progress towards their goal visible.
• spend a certain amount (treats, movies, toys)

PayDay: When Does Allowance Get Paid?
Make sure you set a day of the week to pay the allowance and stick to it. Over time, this teaches children the value of sticking to their financial commitments.

High Tech Help: What Online Resources Exist?
For families looking for cool tools to help with allowance management, check out www.minyanland.com or www.activeallowance.com. These tools each offer tracking mechanisms for allowance.

As much as we wish we could, we can’t build the future for our children. But we can build our children for the future. So show them the money—teaching them money management skills is a great way to start.

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