Why Should You Pay Your Kids

Giving kids an allowance is one parenting topic that really generates a good debate. Some parents, and experts alike, argue that children should be given a nominal amount of money at regular intervals. They believe that an allowance can be used to teach children the value money. On the other hand, there is the argument that children shouldn’t expect payment for anything. All of their needs are provided by the parent and if extras are wanted, parents usually cough the funds up for that as well.

The fact is kids do need to learn how to manage money. The best lessons are through experience and giving an allowance means that you, as the parent, have a chance to provide guidance. If you wait until your child is an adult before you deal with money management, then you miss the opportunity to influence good financial behaviors.

Allowances can be used to teach children basic math skills, logic, how to plan for expenses, the necessity of making spending choices and achieving the full value for their money. If a child makes a mistake with money, chances are the consequences will be minimal. But, the lessons he will learn from those mistakes will stay with him forever.

Develop a Plan

Before you start doling out the cash, consider your reasons behind giving an allowance. Popular opinion is that allowance should be given in exchange for the child performing some service. While this is sensible, don’t fall into the trap of paying kids to help with household chores. As a member of the family, children should be expected to participate in the care and upkeep of the home. Instead, pay kids for tasks that fall outside of their normal chores like washing the cars or tending the garden. Develop a list of tasks that you’re willing to pay for and discuss these with your child. Explain the purpose behind an allowance and give him a chance to express his opinion about what should be included or removed from the task list. But remember, you are handing out the money so you should have the final say on what tasks go and what tasks stay.

What is the Right Age?

Your child may be ready to collect allowance if they have begun to express an interest and understand the basic concept of money. Children as young as five may be able to distinguish between different coins, count and realize that money is exchanged for goods. Once kids understand these concepts they are ready to learn about money management.

How much is enough?

First, and most important, is your budget. Ask yourself how much you can afford to give your child for allowance. You don’t need to break the bank. Children between the ages of 5-7 will be satisfied with amounts as small as $.50. The amount should be adjusted as your child ages and the complexity of tasks increase.

Pay on Time

Just like you, if your child does the work, he’ll expect payment in a timely manner. That means you have to make the payments dependable and consistent. Pick a specific day and time of the week when you’ll be handing out the cash. Younger children should be paid weekly. As your child ages consider moving payments to a bi-weekly or monthly schedule. This will really push the lesson about budgeting and teach your child to stretch their dollars until the next installment is due.

Teach, Teach, Teach

Don’t just give your child an allowance and leave him to his own devises to develop good management skills. Teach your child to evaluate his spending habits. Start by passing some responsibility to your kids. Insist that your little musician buy his own guitar strings. This will teach him to plan and save for expected expenses. If properly managed, he’ll come to understand that a comfortable balance between wants and needs can be achieved.
This is also a good time to help your youngster open his own bank account. Together, the two of you can research banking terms and choices. He’ll have a safe place for his cash and be more confident about his financial decisions in the future.

Expect your child to complete the work.

If you are paying an allowance in exchange for work, then payment should not be given until the work is completed. There will be times when homework or unexpected activities get in the way. Children shouldn’t be penalized when this happens. Nothing should ever trump school work. But give your kids an alternate date to complete the task and pay the allowance with the understanding that his next payment could be docked if he doesn’t follow through.

Establish standards

If you agreed to pay your child to clean your office and notice that the room is barely better than before, then withhold payment until it is cleaned to your specifications. Talk to your child up front about what you want him to accomplish. It is important to make certain your expectations are reasonable given the task and the age of your child.

Let your children learn from their mistakes.

If your child spends all of his allowance and doesn’t have enough money to pay his way into the movies on Saturday night, don’t bail him out. After a few boring Saturdays at home, he’ll learn to start saving some of his money for the things that are important to him.

Continue to pay for big ticket items.

Your child will probably be saving for an eternity to pay for more expensive items. If it’s a need, it probably should fall into your realm as a parenting expense. If it’s a want, then ask your child to contribute something to the cost. Establish the contribution amount and give your child a timeframe for when you expect to buy the item.

Encourage your child to donate.

Suggest that your child use a portion of his money to occasionally support a worthy cause. Teach him that money can be used for more than buying the things we want, but it can be used to do good things for other people.

Don’t control the child’s spending.

It’s fine if you require your child to save a portion of hisr allowance or if you pass some responsibility for hisr needs on to him. But, he should be able to determine what happens to that portion of the allowance that is not already accounted for. If you are uncomfortable about an item that your child plans to purchase, ask him if that is what he really wants and suggest he think about the purchase a little longer. But remember, one of the joys of having money is the knowledge that you will be able to spend it on something you really want.

Never pay for good grades or good behavior.

Children should be expected to perform well in school without financial inducement. Linking grades or behavior to money may send the wrong message that money is the only reason to learn or be good. And, your plans may backfire when your kid decides that all the hard work isn’t worth the small financial return.

Additional Resources…

Money Instructor Teaches kids money lessons and provides basic money worksheets.
Kids Wealth Provides money saving principals and savings products for kids.

Written by Karen May
Editors Needed!