Should your kids get an allowance?

By Bankrate.com

Most money experts agree that children should be given an allowance in order to learn financial skills at an early age.

"Giving your kids an allowance is the best money-management tool you can use with your children," says Janet Bodnar, the deputy editor at Kiplinger's Personal Finance.

Have you ever noticed that children will spend unlimited amounts of money as long as it's yours? "When it's their money on the line, children make more-informed purchasing decisions," Bodnar says.

The problem is that most parents resist giving children an allowance, and, if they do, they usually give the children too little. If the allowance isn't large enough for children to experiment with -- to make mistakes with -- it won't have the learning effect you'd like it to have.

How young is too young?

As soon as a child begins to express a sincere interest in material wants -- as in, "I want that!" -- it's time for an allowance. Depending upon the child, that's probably around ages 3 to 5.

The first mistake most parents make is starting too late. The majority of parents wait until their children are "tweens," 9 to 12 years old, and they miss out on the opportunity to discuss money with young children who are more apt to listen to, and take, their parents' advice.

By the time kids are teenagers, they have additional influences on their spending habits, including friends, advertising, pop culture and the media.

How much is too much?

The first question parents usually ask is, "How much allowance should I give my children?" Some experts recommend a weekly allowance that totals a dollar for each year of a child's age. But rather than determine the amounts by your children's ages or follow what other parents give their kids, make an informed decision based on what you expect your children to do with their allowance.

As your children get older, they will have to take on more responsibility for their spending habits as their allowance is increased. Decide as a family how the allowance is to be used. Will your children be expected to purchase movie tickets, clothes, birthday gifts for friends and school lunches? If so, the allowance has to be high enough to cover those expenses. Then, if your children overspend before the end of the week, they won't have any money for a movie or a trip to the mall on Friday night.

Tying allowance to chores

Many child-development experts agree that linking an allowance to the completion of chores is not the best approach.

"My recommendation is to keep the allowance totally separate from the chores," says Aletha Solter, a developmental psychologist and founder of the Aware Parenting Institute in Goleta, Calif. "That way, children will learn the value of cooperation and experience what it feels like to contribute to the family."

In addition, once children have other streams of income, such as monetary gifts for birthdays and holidays or a part-time job after school, they often balk at doing chores at home in order to earn their allowance because they are no longer dependent on Mom and Dad for all income.

 1 | 2 | next >