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Teaching your kid about money with an allowance is smart. You can help them become financially savvy and develop generosity and entrepreneurship.
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Using Allowance to Teach Kids About Money
One of most popular episodes last season was about teaching kids about money. I had interviewed Ron Lieber, NY Times columnist about his book, The Opposite of Spoiled.
We discussed helping kids to be comfortable with both how to handle money and teaching them to be thoughtful with their finances.
Today we’ll look at putting theory into practice – our oldest has began receiving an allowance.
I know that many of you are in the boat – we want to pass on good money habits, so I hope giving you a peek at how we’re doing it may help make the milestone easier.
Experts suggest starting an allowance around the time they start kindergarten, but you have a clearer on what your child can handle.
Believe it or not, some pre-schoolers may be ready for an allowance. Sesame Street created content that helped kids grab the fundamental concept of needs vs wants.
How Much Allowance Should We Give?
The American Institute of Certified Public Accountants found the average American family that pays an allowance spends about 50 cents per year based on the child’s age a week. So an 8 year old would get $4/week.
Because she’s four, we’re starting small – $1/week. We’re pretty sure it’ll go up later, but right now she’s happy with what she has.
You may be wondering how can she learn about spending if we’re giving her $4/month. What we’ve come up with is a contribution system.
Any extra she wants she has to put something in. I’ll give you an example with our groceries.
We have snacks as a part of our grocery budget – chips, sweets, you name it. We pick up things that all of us enjoy. However if she wants to get a particular snack that she wants for herself, you has put the money in.
Should we Tie Chores to Allowances?
I think there is a valid case to be made for both sides. For us, we decided to not tie them together for now.
We’re a family and to keep things manageable, all of us have to contribute.
We expect the essentials (tidying up her room, feeding her cat) to be done regardless if she gets an allowance or not.
The good news for us is that she enjoys doing ‘big girl stuff’ so we don’t have a problem with her cooperating with chores. If she does (and we expect it will happen), then we’ll take away a privileged, like tablet time.
Giving and Savings
You may be listening and wondering how we’re tackling teaching our daughter to save and give. After all money is more than spending on stuff.
The foundation right now is to lead by example and start small. For giving we’re focusing on her buying some materials and making gifts for her friends and others.
I think experiencing that joy of giving would be wonderful. Eventually we want to introduce her to organizations like Donors Choose where she can help other kids.
Thoughts on Kids and Allowances
I’ll be updating my blog as we delve into further, but I’d really love to get your thoughts and ideas about allowances. How much do you pay? When did you start? Any tips? Please share them. Visit CoupleMoneyPodcast.com and add your comments. We can help one another out.