How Much Should Your Child Get for Allowance?
Recently Catey Hill of MarketWatch shared some mistakes that parents make when it comes to giving their children allowances. As it turns out there actually is no magic number for how much you should be paying your child. Instead the focus should be on how they manage their money. That being said one recommendation is that the child receive $1 per week times their age, meaning a five-year-old would get $5 per week while a 10-year-old would get $10. Of course your budget and what you can afford to give your child will also play a big role in determining their allowance.
Another mistake parents can make is waiting too long to start giving allowances. Around 50% of parents wait until their children are eight before giving out allowances but experts suggest they should be starting as early as four or five years old. The idea is that, as soon as you child is old enough to understand the concept of money (such as learning to count it), it’s time to start teaching them about managing it by giving them an allowance.
Perhaps the biggest challenge when it comes to giving children an allowance is determining whether they should get a flat amount regardless of the work they do or if they’ll need to truly earn their money. Many parents seem to prefer tying allowances into doing chores and “docking pay” for jobs that aren’t completed. While their may be some value there in terms of instilling work ethic financial columnist Ron Lieber argues that doing so could instead lead children to simply stop doing chores once they’ve reached their short term monetary goal. Author Kimberly Palmer also notes that children should have certain responsibilities that are assigned to them as contributing members of a family that are not tied to their set allowance. On the other hand she does support incentivizing children to do extra chores by offering extra pay.
Giving your child an allowance is an important part of teaching them about money and the value of a dollar. In addition to the opportunity to show them what it means to work and how to earn income, you can also customize your approach to inform them about saving and how taxes work. Although there are many decisions to make about how much you will pay your child or what you’ll pay them for, the important thing is that you do talk to them about money and prepare them to be financial responsible adults.