Allowing Allowance
Teaching Children Responsibility One Dollar at a Time
Setting the expectation that a child will do x to earn y amount of money per week teaches children responsibility, cause and effect, and pride in completing tasks.
— Shay Olivarria, author of Shay Olivarria, author of “All My Mistakes: Money Lessons for Emancipating Youth”
When Danny Payne was a child, he would go to the store with his parents and find a toy he just had to have. Although many parents give in and fork over the cash to please their children, Payne’s parents reminded him of the long list of chores posted on the fridge that would allow him to earn the money to buy the toy. “I can remember that mowing the lawn paid $1.25, which I’m sure violated child labor laws because our Midwest lawn was huge,” said Payne, a California-based certified financial planner.
After a week or two of mowing the lawn and checking off chores on that list, Payne began to value his earnings and decided that the toy he just had to have wasn’t necessarily worth the money. Payne learned a valuable lesson about managing his finances and prioritizing his wants and needs.
“Looking back, I realize this cooling off period was teaching delayed gratification and the patience to make better financial decisions,” Payne said. “Delayed gratification teaches kids to control their emotional reactions and make better financial decisions in the long run.”
Often, when children realize that even without an allowance, they have the best video games and electronic devices, the value of earning money decreases. Parents then find that teaching responsibility involves much more than just handing over a few dollars in exchange for a few folded loads of laundry. Instead, setting fiscal and household boundaries for your children can help them grow up to be smart — and grateful — money managers.
The Benefits of Allowance
Payne’s experience with money management as a child prompted an interest in budgeting and prioritizing his allowance and later a career in the financial industry. Now, as a father of a toddler, Payne said he wants to instill in his daughter at an early age important financial lessons, such as delayed gratification, the value of saving and managing income. “The goal is for a child to apply these early life lessons to the spending decisions they will face as adults,” Payne said.
Granting an allowance in exchange for chores teaches how to manage money and how to be successful. Tying behavior to a monetary reward teaches children to act responsibly when trust is given. These life lessons can travel from childhood to adulthood and impact how your child manages or avoids debt later in life.
According to Dr. Tina Tessina, author and California-based psychotherapist, an allowance helps a child develop a strong work ethic. “An allowance for no reason teaches a child that money doesn’t have to be worked for,” Tessina said. “An allowance dependent on doing certain chores and maintaining grades teaches a child that money can be earned.”
How a child chooses to spend that hard-earned cash can set a pattern for later life, Tessina said. “If he or she blows the whole thing on candy, toys or video games, the child will learn to spend the limit of what he or she has,” Tessina said. “If you help your children start a savings account with a percentage of the money or save up for things they want, they learn to save and how great it feels to buy something they waited and saved for.”
Teaching money management to your children also helps them realize that their parents earn money, too, said Shay Olivarria, author of “All My Mistakes: Money Lessons for Emancipating Youth.”
“Many children today don’t understand that you have to put money in your credit union to get money out because all they see parents doing is swiping a card,” Olivarria said. “Setting the expectation that a child will do x to earn y amount of money per week teaches children responsibility, cause and effect, and pride in completing tasks.”
Setting Boundaries and Guidelines
For an allowance system to work, parents should first establish clear guidelines. Olivarria suggests a written agreement with goals to help the family set the parameters. “For younger children, it helps them understand the seriousness of the agreement and for older children, it helps them understand negotiation, the importance of keeping your word and the consequences of not holding up your end of the bargain.”
A visible chart on the fridge with dollar amounts tied to expected behaviors and duties works well for many families. A contract with rules and terms of chores and payments should also be readily available. Parents may then point out the terms of the agreement when a duty is not completed.
Angela Sarafin, a Texas-based family therapist, said that a contract created by the entire family helps ease the blame game when children fall short of fulfilling the expectations. “Parents can point to the terms and say ‘I’m just following the terms we agreed to – I’m not the bad guy here,’” Sarafin said.
Although adherence to the contract terms is crucial for most plans to work, Sarafin said, it is often necessary for parents to provide reminders. “Our brains are not finished developing until we are in our mid-20s,” Sarafin said. “We learn through repetition and novelty. So when you have to remind your children to do chores, it is not necessarily bad behavior on their part. Time management and maintaining focus is particularly difficult for some children and may require a higher level of involvement from the parent.”
Sarafin said even the best-written contract might need to be adjusted as the family works through kinks in the plan. “It might be useful to give partial credit or perhaps to have an unmastered skill as a potential for bonus instead of including it in the basic allowance earning tasks,” Sarafin said.
Allowance based on behavior may also call for a little leeway in planning. “If behavior is going to be tied to the allowance, make that clear up front and make sure you have a list of desirable behaviors and the frequency of each,” Sarafin said. “Make it reasonable. If your child is having behavior problems every day at school and you are requiring perfect behavior every day in order to earn the weekly allowance, you are setting your child up for failure.”
On the other hand, consistency can provide valuable lessons for your children. Don't give the cash if the child is not living up to his end of the agreement. If you do, “you are inadvertently teaching your child to have an entitlement mentality,” Sarafin said.
Children also must learn to plan for special occasions, events and special toys they desire. “If your child has known for weeks about an event and then comes to you the day before wanting extra money for that event and you give it to him without discussion, then you have cheated him out of the opportunity to learn the benefit of saving money,” Sarafin said. “Sometimes, the best thing you can do is let your child experience the natural consequences of failing to plan ahead.”
- Photo Credit Flying Colours Ltd/Digital Vision/Getty Images
