There are many philosophies behind giving children an allowance, but the greatest purpose is really quite simple - to teach your children how to handle an income. An allowance is not exactly a real-world concept and has consequences when used as a bribe for getting good grades, doing chores or behaving. However, if used as a teaching tool, an allowance can be helpful in creating good money management habits and allowing your children to learn from mistakes early.
An allowance should only be given if you are willing to invest the time to teach your children to be financially responsible.
Make a list - Spending is one of the first concepts that children tend to learn with regard to money, so it is natural to use an allowance to transfer some expenses to them. If your children always have to ask you for money to make a purchase, it is very easy as the parent to lose track of how much you are handing out. An allowance enables you to budget what you are willing to spend on discretionary purchases and allows your children to decide the importance of each purchase.
It is first helpful to create list of expenses your children will own. This gives you a great opportunity to set expectations and review responsibilities over time. Here are a few common expenses:
- Social activities with friends
- Toys and video games
- Extravagant clothing
- Extra-curricular school activities
- Snack foods
- Automobile expenses
Inevitably, there will come a time when your children over-spend and find they do not have money for something new that has come along. It is important at this point to not give them extra money or loans! You have a great opportunity to teach them a lesson about living within their means early while the stakes are low. This is a classic issue among young adults today as they use credit to support their spending habits eventually setting them back years financially.
Evolve with your children - As your children mature, review the allowance each year and add more responsibility. For example, a 1st grader may be responsible for buying their favorite snack food at the grocery store or a new video game. A high-school student may be responsible for movies with friends or car insurance. With teenagers, however, you should consider reducing the allowance and having your children replace the income with a part-time job.
Don't forget to teach about the other important aspects of money including short-term savings for larger purchases, long-term savings for college or retirement, and charitable giving. Help them find a way to automate each process as much as possible. It is very easy to setup an automatic savings plan between a checking and savings account. As part of your allowance review, come up with a plan around these other areas as well.
How much should I pay? - This question first depends on the amount of responsibility you give your children. After coming up with a list of responsibilities, create a budget that fits best. A good rule of thumb that corresponds to the national average would be a dollar per week for every birthday. If your child is 8 years old, they would receive $8 per week.
If you happen to remember how much allowance you received when you were a child, you can use a calculator to find the inflation-adjusted allowance today. Threejars.com offers a calculator as well as an allowance tracking system to help keep you organized and teach your children how to manage their money under your supervision.
And lastly, ask around. Talk to other parents to see what they are doing. Understanding what your children's friends are receiving and why, can ensure you are making reasonable assumptions and prepare you for questions about why Johnny down the street is getting more money.
Want more thoughts and ideas on being a smart money parent? Visit http://www.smartmoneyparents.com to view the article archive and sign up to receive email and Twitter updates.
Article Source: http://EzineArticles.com/?expert=Scott_D._Serfass
Article Source: http://EzineArticles.com/8137650
An allowance should only be given if you are willing to invest the time to teach your children to be financially responsible.
Make a list - Spending is one of the first concepts that children tend to learn with regard to money, so it is natural to use an allowance to transfer some expenses to them. If your children always have to ask you for money to make a purchase, it is very easy as the parent to lose track of how much you are handing out. An allowance enables you to budget what you are willing to spend on discretionary purchases and allows your children to decide the importance of each purchase.
It is first helpful to create list of expenses your children will own. This gives you a great opportunity to set expectations and review responsibilities over time. Here are a few common expenses:
- Social activities with friends
- Toys and video games
- Extravagant clothing
- Extra-curricular school activities
- Snack foods
- Automobile expenses
Inevitably, there will come a time when your children over-spend and find they do not have money for something new that has come along. It is important at this point to not give them extra money or loans! You have a great opportunity to teach them a lesson about living within their means early while the stakes are low. This is a classic issue among young adults today as they use credit to support their spending habits eventually setting them back years financially.
Evolve with your children - As your children mature, review the allowance each year and add more responsibility. For example, a 1st grader may be responsible for buying their favorite snack food at the grocery store or a new video game. A high-school student may be responsible for movies with friends or car insurance. With teenagers, however, you should consider reducing the allowance and having your children replace the income with a part-time job.
Don't forget to teach about the other important aspects of money including short-term savings for larger purchases, long-term savings for college or retirement, and charitable giving. Help them find a way to automate each process as much as possible. It is very easy to setup an automatic savings plan between a checking and savings account. As part of your allowance review, come up with a plan around these other areas as well.
How much should I pay? - This question first depends on the amount of responsibility you give your children. After coming up with a list of responsibilities, create a budget that fits best. A good rule of thumb that corresponds to the national average would be a dollar per week for every birthday. If your child is 8 years old, they would receive $8 per week.
If you happen to remember how much allowance you received when you were a child, you can use a calculator to find the inflation-adjusted allowance today. Threejars.com offers a calculator as well as an allowance tracking system to help keep you organized and teach your children how to manage their money under your supervision.
And lastly, ask around. Talk to other parents to see what they are doing. Understanding what your children's friends are receiving and why, can ensure you are making reasonable assumptions and prepare you for questions about why Johnny down the street is getting more money.
Want more thoughts and ideas on being a smart money parent? Visit http://www.smartmoneyparents.com to view the article archive and sign up to receive email and Twitter updates.
Article Source: http://EzineArticles.com/?expert=Scott_D._Serfass
Article Source: http://EzineArticles.com/8137650
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