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The subject of kids' allowances is a hot topic in the momosphere, as confused parents try to figure out the best way to teach their children responsible money management. Most people would agree that hands-on experience is best, of course, but how do you navigate confusing chore charts? Should you tie chores to payment, or are chores just part of being in the family? And how do you know how much to pay them?
Janet Bodnar of Kiplinger has written a thorough piece with practical advice for parents. She breaks down her tips into age groups. For the young elementary student, she tells us:
Kids will spend unlimited amounts of money as long as it's yours. When their money is on the line, they've got skin in the game, as one of my regular correspondents is fond of saying. The best way to let them start making their own decisions is to give them an allowance, and this is a good age to begin.
For the older set, Bodnar cautions against allowing them credit cards too soon:
I'm not against credit cards. I just think that teenagers in general aren't mature enough to manage them. And there's plenty of research to back me up. James Roberts, a marketing professor at Baylor University, has found that young people who use credit cards "are less price-sensitive, spend more, and overestimate their available wealth compared to those who write checks and pay cash." They're also more likely than adults to max out their credit, and they're more susceptible to impulse buying.
Thankfully, there is no shortage of opinions from parents with widely varied experience on the subject. Parenting Advice shares some concern about the traditional allowance system:
It is best if the children are given an allowance that is not specifically tied to completion of the chores. It is important because everyone in the household must pitch in when things need to be done around the house. It is simply part of being a family member. By using money to foster behavioural change, parents are not utilizing the best way to get someone to do something .... We want them to complete their chores to help them develop responsibility and skills that they will take into adulthood, not because they are being rewarded with money.
It's a question even high-profile families struggle with. Susan Beacham points out the interview with the Obama family's admission in People Magazine that the senator's travel schedule doesn't always allow for allowance to be paid on time:
It did my heart good to see, with all the topics this story could cover, their was space to talk about allowance. Clearly, allowance is an important discussion in every family - no matter who they are. Paying on time is a struggle most parents have had to deal with.
But, make no mistake, kids are taking note of the delay.
My advice - make it your business to pay allowance on time. Allowance is a money promise. If you break money promises to your kids, they may think it’s okay for them to break money promises to others as well. And that could translate to credit problems later in life.
Frugal Dad has surprised some of his readers by his stance on allowances for kids. He doesn't pay them. Instead, he calls it "commission", with specific values assigned for each task. He explains:
I don’t like the word “allowance.” It looks too much like receiving money whether you work for it or not. I personally do not believe this helps to prepare kids for the real world where they are expected to get out there and earn a living. So around the frugal family household you actually have to work to get paid (novel approach, isn’t it?). The various daily chores are age-appropriate and do not require a great deal of time to complete. We also include some larger chores for the kids to pick from in order to earn a little extra money. These larger chores are optional, but provide our kids the opportunity to stretch to earn more money.
Click over to his post for an impressively detailed spreadsheet of how his family manages this.
We've finally settled into a routine that works for our own family. Weekly allowances are half the amount of the child's age (i.e., our 11 year old gets $5.50/week). We don't try to keep a microscopic look at
