How to Decide on an Allowance for a Child

The purpose for an allowance is to teach children how to handle money. The child can then learn how to save some of that money, tithe 10 percent, and then spend the rest. Practicing this for at least 10 years can give a child the experience they need to be able to handle money properly when they leave for college. In general, children can begin understanding the concept of money at age 5, but can't really count the money at age 8. The starting age is up to your discretion.

Difficulty: Easy

Instructions

Things You'll Need:

• Cash
• List of chores
• Written agreement
• Children

1. Consider a child's age when coming up with an amount of money for allowances. The amount of money should be based on the child's needs and wants. If a child is 5 years old, they may only be interested in buying a Barbie or a small toy truck. A 10-year-old may be more interested in games for a Playstation. You want the child to be given enough money that, after several weeks, he would have been able to save up enough money to buy something he wanted.

2. Consider the amount of chores the child is required to do. The more responsibility a child has, the more money she should be paid.

3. Pay the child per chore. Make a list of chores and how much each chore is worth. Then have your child put a check mark next to each chore he completes that week. Pay him on the same day each week and then post a new chart.

4. Use your own income as a base in deciding how much money to give your child for an allowance. Obviously, a family that generates $200,000 a year will be able to give their child a larger allowance than a family that only generates $30,000.

5. Create an agreement with your child, type it up, print it out and have her sign it. Then you sign it. The point of this exercise is so that children know they are getting paid only when they complete the tasks you have assigned. When payday comes and they don't get any allowance, you can have them look back over the agreement so that they can see they didn't meet the terms to get paid. It also teaches them about contracts they may enter in to in the real world. They will learn to look over all the terms before entering into the agreement.

Tips & Warnings

• Write a new agreement each year. Your child will quickly learn that they need to do some negotiating before entering in to a contract that will hold valid for the whole next year.