Things You'll Need:
- Child
- Discipline
- Organisational skills
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Step 1
Opinions vary on what age is best to introduce allowance. Some experts recommend starting as soon as your child enters the 'I want' stage, which can range from age 3 to 5. Some parents may find this too young, so opt for the 'tween' years, age 7-12. While every child is different, it's important to bear in mind that children are not quite so receptive to parental advice from the age of 9.
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Step 2
Determine how much money your child will be given each week. It's best to set out a sum that allows a child the space to experiment with money while not allowing them to think money is limitless. This varies with age as well your home budget. A five-year-old's needs are different (and cheaper) to that of a pre-teen. A good rule of thumb is $1 for each of their life per week, so a 10-year-old would receive $10 per week.
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Step 3
When setting the amount of your child's allowance determine what sort of items they will need to pay for with it. For example, will they need to budget for entertainment, clothing or lunches? Ensure this is made clear when introducing pocket money.
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Step 4
Open up a bank account for your child to encourage saving. Encourage regular saving each week and make it easy for your child to access their bank account by accompanying them to the bank when they see fit to make a withdrawl or deposit.
Providing your child with a purse or wallet is also a good idea. Younger (and older) children have a tendency to misplace things regularly, so providing them with a receptacle for their money can help cut down on their waste. -
Step 5
Make sure your child recognizes the value of money - literally. Particularly with younger children, use allowance as a way of teaching them about the different sizes of coins and their values. It may take some time until they are fully fluent with money, so be patient.
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Step 6
Make clear to your child why they are being given an allowance. Many parents choose to tie allowance into performance at school or chores performed at home.
Tying allowance into chores is a contentious issue for experts and parents alike. For routine chores, after some time, your child may decide that chores 'aren't worth' the money received in return. To combat this, keep weekly chores separate and instead offer financial rewards for occasional jobs such as car washing or detailing, painting and decorating or babysitting.
While success at school should be rewarded, grades are issued at intervals which may not be regular enough for a child to budget through.
My personal preference is allowing my 8-year-old a small budget ($5) each week which he can spend how he sees fit. I am lucky in that he is helpful around the home with small jobs, however for large jobs I do offer him small financial incentives. This is a great incentive for him as many items he wants cost more than his weekly fiver. -
Step 7
Once you determine a weekly allowance amount, stick to it until the next birthday. If a child finds that they can get 'extra' each week, they will. Part of using allowance as a tool for teaching financial skills to young people is that they learn that money does not grow on trees.
