Allowance is a hot topic for parents when it comes to teaching financial responsibility to their children. Some parents believe that giving their children an allowance helps them learn how to manage their money, while others believe that an allowance can teach kids to become entitled and irresponsible with their finances. In this blog post, we'll discuss the pros and cons of allowance, how much to give, and how to use it to teach financial responsibility.
Pros and Cons of Allowance
Teaches money management skills: An allowance gives children the opportunity to learn how to manage their money. They can learn how to save, budget, and spend their money wisely.
Teaches responsibility: When children receive an allowance, they are given responsibility for managing their money. This can teach them to become responsible adults who are able to manage their finances.
Encourages independence: An allowance can also encourage children to become independent. They can use their money to buy things they want, without having to ask their parents for permission.
May lead to entitlement: Some children may begin to feel entitled to their allowance and may begin to expect it without doing anything in return.
May not teach the value of money: Some children may not understand the value of money if they receive an allowance without earning it.
May cause conflict: If parents don't agree on how much allowance to give or how it should be used, it can cause conflict and tension in the family.
How much allowance to give your teens
When it comes to deciding how much allowance to give your kids and teens, there is no one-size-fits-all answer. The amount you give will depend on a variety of factors, including your financial situation and your child's age and needs.
For example, parents may give their 7-year-old child a small allowance of $5 per week, while giving their 17-year-old child a larger allowance of $50 per week. The amount should be enough to allow the child to learn how to manage their money, but not so much that it becomes a burden on the family's finances.
Some parents choose to give their children a set amount of money each week or month, while others give their children a certain amount of money for completing specific chores or tasks.
It's important to be consistent with the amount you give and to make sure that it's a reasonable amount that won't put a strain on your family's finances.
How to use allowance to teach financial responsibility to kids
Set up a budget: Encourage your child to set up a budget for their allowance. This will help them learn how to manage their money and make sure that they have enough to cover all their expenses.
Teach them to save: Encourage your child to save a portion of their allowance each week or month. This will teach them the importance of saving for the future.
Teach them to spend wisely: Encourage your child to spend their money wisely by making smart purchases and avoiding impulse buys.
Teach them the value of money: Make sure your child understands the value of money by explaining to them how much things cost and how hard you have to work to earn money.
Encourage them to give: Teach your child the importance of giving back by encouraging them to donate a portion of their allowance to a charity or a cause they care about.
Example of Allowance for Kids
Let's say you have a 12-year-old child who receives an allowance of $20 per week. You could set up a budget with them to help them manage their money. For example, they could allocate $5 per week for saving, $5 per week for spending on personal items, and $5 per week for giving to a charity or cause they care about. The remaining $5 could be used for unexpected expenses or put into their savings account.
To further reinforce the importance of financial responsibility, you could also consider matching a percentage of their savings if they reach a certain goal, such as saving up for a specific item they want. This will encourage them to save and teach them about delayed gratification.
In addition to budgeting, you could also teach your child about investing by setting up a small investment account for them. This will help them learn about the stock market and how to invest their money for the future.
Overall, the key is to use allowance as a tool to teach your child about financial responsibility. By setting up a budget, teaching them to save and spend wisely, and encouraging them to give back, you can help them develop healthy money habits that will serve them well into adulthood.