Friday, 17 April 2009

• Guidelines and Resources for Determining Kids’ Allowances

  
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  Teaching kids about the value of money is one of the greatest lessons parents can impart. With a healthy attitude towards money, kids will enter adulthood with the knowledge of smart money management, sensible spending parameters and the importance of saving.

  There are reports that Malia and Sasha Obama get $1 each for their weekly allowance. Maybe it’s time for the President to loosen the purse strings a little bit! $1 seems a bit meager for kids that age, but it got me wondering about allowances in general and what the guidelines are for allocation.  Editors at Kiplinger Magazine advise parents to start at an appropriate age, which they consider to be about 6 or 7 years of age. It is during those years when children start learning about money in school and can grasp the value of a dollar. As for an amount, they recommend a weekly allowance equal to half a child’s age, for example, a 6-year old would get $3 each week, but you can set the amount to whatever you see fit.  

  Although kids may not entirely grasp the concept of money until that age, the education process can certainly start from an earlier age. My four year old son has shown an interest in money, coins in particular, and even offers his services around the house and in the yard in the hope of earning an extra quarter or two. We haven’t yet formally rolled out a weekly allowance for him, but he is grasping the basics of earning money and spending it on things he values. We recently took him to the Museum of Science and prior to the outing, he took money out of his piggy bank to help pay for a portion of a toy he anticipated getting. Witnessing him trudge up to the cashier, coins clenched in his hand, pay for the item and leave the story knowing that he contributed his own money to the purchase, was priceless.

  So, it is really up to parents to determine the specifics behind when and how much, but here are some other guidelines Kiplinger recommend parents follow when it comes to allowances:  

  ·         Every allowance should include some money the child can spend however he or she wants. If every cent is earmarked for lunches, bus fares and the like, the child gets no experience in choosing among spending alternatives.

  ·         Don't come to the rescue every time your youngster runs out of money. The allowance should be realistic and determined by mutual agreement. If the child consistently spends fast and needs more, either the allowance is too small or spending habits are sloppy. Find the cause and act accordingly.

  ·         Don't tie the basic allowance to chores. Some families are incredibly well organized. But many parents have a tough time keeping track of multiple chores over the course of a week. Even with online chore-tracking sites, the system can collapse under its own weight.

  ·         Instead of attaching the basic allowance to everyday household jobs, tie it to "financial chores." Make kids responsible for some of their own expenses: collectibles, movie tickets, after-school snacks. To link pay with work, pay for "extra" jobs as soon as your kids complete them. That's easier to monitor than a week's worth of chores.

  ·         Keep it simple. When children are younger, consider keeping track of their money with a simple checkbook system. Each month record their allowance (plus gift money or other income) in a checkbook. When they want money, have them write you a check and subtract it from their balance.

  Here are some books that can help parents learn more about raising financially-savvy kids: 

  • ‘Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them’ (Kiplinger's Personal Finance) by Janet Bodnar
  • ‘Kids and Money: Giving Them the Savvy to Succeed Financially’ by Jayne A. Pearl
  • ‘Raising Financially Fit Kids’ by Joline Godfrey

  Kids are eager to learn about money management and develop the tools necessary to be a financially independent adult. By having an initial understanding of money, each day with mom and dad at the grocery store, the bank, the post office, etc. can be a learning experience. And if kids have a cool money receptacle for stashing their cash, like this fun piggy bank, money jar or coin sorter, they’ll be even more excited to start earning their allowance.

  guest post from motherhood examiner jeana tahnk

  How do you determine your kids' allowances?

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