by Lisa McCarthy
Chores and allowances are great ways to help your children grow up to be responsible people and smart money managers.
Many parents, including myself, have a lot of questions regarding the allowance. If you take the time to read enough of what's "out there," there sure seems to be a whole lot of answers.
My take on allowance is well -- it depends. To me parenting is an individual journey and what works for one child and their family may not work for another. So, the best advice I can give is read what others are doing, see what the experts are saying, gather up the ideas you like and see what works best for you.
How Early Should I Start?
Generally, it's recommended that parents can start their child's allowance around the age of five or six. The other answer to "when to start" also depends on your child's maturity level.
For instance, my daughter was ready to handle financial responsibility at age four. Will every child be ready at that age? No. On the flipside, I know some kids that aren't even ready at age ten. Don't get discouraged, however if your child is older before they "get it." Children are unique and ready in their own time.
How Much is Enough?
The rule of thumb, or so I am told, is fifty cents to a dollar for every year of age. Using that calculation, my 11-year-old would receive between six to eleven dollars per week. That's a lot more than the fifty cents a week I use to receive. But then again, a gumball is no longer a penny, so I may need to get with the times on this one.
Encourage Well-Rounded Money Management.
Yes it's good to sit down and talk about the basics.
It's important that you show your children how to designate a portion of their allowance to long-term savings goals.
You could suggest that another portion be earmarked for charity, perhaps supporting something that is important to the child. My daughter loves animals so she gives and raises money for pet rescue.
It goes without saying that one portion of their allowance should be used for fun and be spent on entertainment or clothing.
Keep in mind that money management is learned more by observation and doing than by being told how to do it.
Don't just tell your kids how to manage their money. Show them how you manage yours. Have open discussions with your kids about how you manage the family budget. Discuss how you deal with unexpected expenses. Explain it on your child's terms. Let's say the dishwasher breaks down. Talk about how much it costs to fix it, which might mean that you're not going to go out to eat this Friday night.
I still remember my dad talking about compound interest, saving and not buying something unless you can pay cash. I also remember that my dad practiced what he preached. If he wanted a new boat or fishing equipment, he talked about saving for it until he had enough to buy it.
Bailouts Just Don't Happen!
It's really important that you don't bail your child out if they can't afford something, have buyer's remorse or run out of money! Remember the reason you started this whole allowance thing is to teach them about personal responsibility and real life.
In real life there are no bailouts unless you are Bear Stearns or oh well, nevermind that is a different financial lesson all together! The big takeaway is that once the kids are mature enough to handle money, they should be mature enough to handle making decisions about their money and the consequences tied to those decisions.
How do you deal with allowances in your family? What are you planning? Let us know in the comments!
Lisa Laughton McCarthy is a mom with a passion! As the founder of MoneySmartKidz and author of "The Money Tree," Lisa, takes delight in finding fun creative ways to help show young children the value of financial independence! Her first book "The Money Tree," with its eye-catching illustrations, is the answer to every parent who wants to give their child a head start on the road to financial independence.
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