How to Give Kids an Allowance

I am now honored to be a parent, and the subject of allowances has entered into the discussion. The subject of children’s allowances can get surprisingly contentious. Some parents have very strong opinions about the topic. I did some research and found some helpful tips that I thought I would share.

The purpose of an allowance: An allowance enables a child to experience money and how to manage money. You can teach your kids the concept of money, but generally most kids learn with actual cash they can use. I think kids need to use real money in real situations in order to learn about money.

I think an allowance makes sense only when you tie them to a chore or require them to earn it. This is how it works in the real world works anyways. Some like to give money because they are a part of the family, which I also understand. I have also researched that many families do a mix of both, part chores, part in just giving.  I am currently thinking about requiring certain chores such as making their beds, setting the table, and giving them a few extra options for additional compensation. This should motivate them to take on additional chores, which will help foster drive and initiative.

An allowance presents a great opportunity to teach kids about generosity, saving, and spending. I would recommend to be proactive to help them understand how money can positively and negatively affect people. An allowance is a great way to do this. I would also recommend to pick a spot of where the child is going to save the money such as a piggy bank or jar so they can learn how to store it and monitor it.

Kids can understand certain aspects of money at a surprisingly young age. Some articles suggest as early as age two, kids can begin to see that money is a means of exchange. I don’t plan to start really until age 4, but if your kid is understanding the concept of money, by all means start an allowance.

Overall, I would recommend to just start one when you can and do not overthink it. Far better to get started and make some adjustments as you go than to wait until you have the perfect system figured out. And if you’re feeling late to the game, the same advice applies to you. Just start. The earlier your kids begin gaining some experience managing money, the better.