If your children have started doing chores around the house, you may be considering giving them an allowance. You might wonder how an allowance for kids will benefit them.
Having your children handling money will have a huge impact on how they manage their finances when they grow up.
WHAT ARE THE BENEFITS OF ALLOWANCE FOR KIDS?
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Everyone handles the topic of money and kids differently. We have struggled for years to find a system that works, and after using this system for the last 3 years, we have found an allowance system that works for any dollar amount you feel your child should receive.
On the first of each month, we give each child their monthly allowance. (We have chosen the amount to be equivalent to their age, but as mentioned, this system works with any dollar amount.)
Whether you give your child the actual bills, open a separate account, or record the amount in a book, that is up to you. We keep track in a book with the following columns – Date, Item, Debit, Credit and Balance.
When our child makes any amount of money (including their monthly allowance) they keep the first $10 – no matter what the earned amount is. We encourage our children to tithe 10% (and our kids agree!). With the remaining amount, 50% goes to them as well, and 50% goes into a family account. (Sometimes one child makes a lot more money if they babysit or have a summer job, but that’s life).
The family account is used for what the kids want, however, they need to decide together how to use that money. If they want to buy a family board game or go to the movies they have to communicate to agree how those funds are used. This is a great life lesson to prepare them for working together in marriage with finances later in life.
Here is an example (we are using higher amounts just as an example):
Since I don’t want my bank telling me how to spend my money, I as a parent don’t tell my children how to spend their money. They choose what they spend and how much they spend but if they blow it all they can’t get mom to come to the rescue.
We purchase all the basics for our children. If they want to buy an extra pair of shoes or additional pants and shirts, they need to use their money to do so.
Our kids “wasted” a lot of money in the beginning but now they see the value in saving up. I would rather have them learn these valuable money lessons as children than try to have to figure it out in adult life.
Of course, since our children are part of our family, there are certain chores that are required.
ALLOWANCE FOR KIDS: WHAT ARE THE BENEFITS?
LEARN THE VALUE OF MONEY
At an early age, children can learn the true value of money. This is especially true when they are using their allowance to save up for something they want.
The difference between a dollar and a hundred dollars, versus how much they earn each week, will be a valuable lesson about saving, earning and handling money.
LEARN TO BARTER
Children who receive an allowance begin to learn the concept of bartering. They may even attempt to trade off chores with their other siblings in order to earn a little more money on any given week.
LEARN TO SET GOALS
When getting paid an allowance, children gain the ability to differentiate between things they want, and things they need. This will help them to save towards specific goals.
If your child wants a more expensive toy, they will learn that they may have to work harder and save longer to obtain the goal of purchasing that item.
GAIN A STRONG WORK ETHIC
Kids that earn an allowance will start to establish a strong work ethic. Once they realize that doing no work gets them zero dollars, while working hard can earn them quite a bit, they will make more of an effort to do more.
LEARN FINANCIAL RESILIENCE
Children who earn an allowance have more of a chance to make mistakes with their money.
When they make financial mistakes, they learn the value of money the hard way.
Kids will learn money can be spent fast, but it takes time to earn it back. This is the key to teaching them financial resiliency.
HOW MUCH SHOULD YOU PAY YOUR CHILD FOR CHORES?
That question doesn’t have a one size fits all answer. Whatever you decide as a parent as fair is the right answer. Some parents choose to pay an allowance for a list of chores completed, while others decide to pay a certain amount per chore completed. Some parents, like us, just choose an amount of allowance to pay our children per month and they help around the house and know what they are responsible for.
First thing first is to determine the chore ideas that you will want to be completed.
If you have been considering giving your kids an allowance, just make sure that they are actually working for it. Earning an allowance has many benefits to children, their development and the way they handle money in the future.