Although our daughter is only two, I’ve been contemplating about how allowances are done nowadays. I remember getting a small allowance when I was a child and thought it would be a good idea for our daughter. I polled my colleagues and found that virtually no one gave allowances to their children. I was a bit surprised since I thought an allowance helped me learn about managing money. Here’s how I think I will approach an allowance:Give a weekly allowance equal to one half her age. So a 10 year old should receive 5 dollars per week. Finance-4-Kids and My New Choice both have articles supporting this amount. Finance-4-Kids recommends as much as $1.00 per year.
Divide her allowance into three categories - savings, sharing, and spending. As regular readers know, I believe saving should always be done first. I will start with 40% for saving. 20% will be for long term savings. 20% will be for a future purchase. Sharing will represent charitable contributions. I will avoid the complication of taxes for now:-) I will start with 20% for sharing. The balance, 40%, will be available for immediate spending.
While I will likely wait until she is three to start the allowance, it’s never too soon have her learn about how to handle money:-)
Photo Credit: morgueFile.com, Zach Carter
This is not financial or parenting advice. Please consult a professional advisor.
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3 comments:
We created a commission schedule with our 7 year old. It might be a little early to start that with yours, but as our child got older we assigned monetary amounts to certain chores (i.e. making bed =$.10, feeding dog=$.05, etc.). Weekly chores like raking leaves or helping wash mom's car earned more. At the end of the week we sat down and added up her "earnings" and pay her in cash. She deposits "savings" in her own savings account at the bank (we review the statement together). She also has a "Giving" envelope for tithing, angel-tree programs, etc. and a "Spend" envelope where she gets to buy a few things on her trips with mom to Walmart or the grocery store.
Just some ideas for your to implement as your child grows into money concepts.
I have been told at 2 1/2 or 3 is usually the age most kids become introduced to money. The test is to show her a $100 and a $1 bill and ask her which one is more money. 3 is a good age to introduce her to money and what it does, but for as an allowance, that usually starts about 6 or 7 when they are able to do chores around the house.
Jason and Money Monk,
Thanks for your comments and sharing your experiences with money and its relationship to chores.
Several of my colleagues shared similar systems that they use with their children. The system has appeal. I like the idea that there is a connection between work and compensation.
One dilemma I have is that I think some chores are family expectation (no compensation) and see some chores for which there might compensation. Do you differentiate between these two types of chores and what criteria have you used?
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