How to Work out a Child Allowance
An allowance is usually given to children for completing certain tasks, although some allowances are given as a way to help children learn to handle the responsibility of managing real money. The distribution of money is the easy part; working out the kinks, however, can prove to be more difficult.
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Instructions
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Create a pay system
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Pay based on chores. Creating a system based on chores means you pay your child a set amount of money each week when specific chores have been completed to your satisfaction. Chore payment can be based upon individual chores: $1 for cleaning the bathrooms or fifty cents for taking out the trash, or as a package deal: $5 for cleaning her room, taking the trash to the curb, and washing the dinner dishes. A good rule of thumb is $1 a week per age of child.
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Pay according to grades. Creating a system based on grades means you pay your child a set amount of money each week or each report card if your child’s grades are within a certain range. Paying on a weekly basis, for instance, can be determined by the grades on each assignment with an “A” netting your child ten cents and a “C” netting your child one penny. Paying by the report card, for instance, would mean paying a set dollar amount based upon the final grade received in the class. An “A,” for instance, could net your child $4, while a “C” could net your child $1.
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Pay a daily living expense. Creating a system based upon daily living expenses means you give your child a much larger allowance than most parents, but with that comes the responsibility of learning to pay for everything you would normally pay for: clothes, shoes, school lunches, movies, toys, fast food restaurants and extra-curricular activities. Your child would receive a set dollar amount each month (or week). It would then be up to your child to budget his money in a way that helps pay for all the things he wants and needs during the month.
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Pay based on gifting. Creating a system based upon gifting means that you give your child a certain amount of money each day, week, or month and don’t expect her to do anything to earn that money. In essence, you are simply providing your child with a little mad money. How she spends it is completely up to her, as long as she doesn’t go against your family or household rules.
Create a raise system
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Raise by grades. Giving your child a raise based upon his grades encourages him to take his schoolwork seriously. It puts the ball in his court—he’s no longer trying to get certain grades to impress mom or dad or to stay out of trouble, he’s working hard to get good grades because there’s a real value associated with his hard work—much like an employee and his paycheck. It causes him to pay attention in class, to turn his homework in on time, and to make sure that he studies for his tests. Not only can you raise the dollar amount based on letter grade, but you can raise the dollar amount based upon level of difficulty in the class.
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Raise by age. Giving a raise once a year teaches your child that she has to live within a certain means during that year and that no amount of begging is going to get more money from you. And if done right, it can also teach her about annual reviews and raises in the workplace.
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Raise by workload. When children are small, they cannot do a lot around the house. As they get older, however, their motor skills improve, their overall body strength increases, their intelligence advances, and their need for more money grows. Providing a raise based upon your child’s ability to do certain tasks can be a wonderful way of showing him how valuable he is as an individual. Young children, for instance, may earn $1 a week for taking out the trash and another dollar for keeping their rooms clean. Older children may earn $5 for mowing the lawn once a week and another $5 for cleaning the bathroom and kitchen.
Create a distribution system
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Pay with cash. Your child’s attention span can play a key role in how you pay her allowance. If she tends to be forgetful or finds it difficult to stay on task without an immediate reward, paying her an allowance, in cash, at the end of the day may work best for her. As she begins to grasp how the allowance system works, you can slowly transition her from a daily allowance to a weekly allowance.
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Pay by check. If your child tends to squander his allowance as soon as he gets it, paying your child by check, then having him deposit it into a savings account can help him learn to be more responsible with his money. First, he’d have to make the trip to the bank, then he’d have to deposit the check, then he’d have to wait a few days to pull out all the money—especially if you wait to deposit the check via an ATM machine after hours.
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Direct deposit into a checking account. This is great for parents who have good intentions but tend to use up the household budget before paying their child’s allowance. Providing your child with a checking account teaches her how to balance a checkbook, practice her math skills, and budget her money more effectively.
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Tips & Warnings
The first year you use the raise by age system, you will get a lot of begging for advance allowances or raises. The second year, that begging will lessen. By the third year, the begging should be completely gone—as long as you’ve stuck to your guns the previous two years.
When paying your child for his grades based upon report cards, don’t dismiss progress report cards. Paying for both progress and quarterly (or semester) report cards helps encourage your kids to keep working hard at those grades.
