At some point, most parents probably think about whether or not to give their child an allowance. But whether or not you should depends on your family, your values, and your child. Here are some pros and cons to consider when it comes to giving children an allowance:
The Pros of an Allowance
Kids learn money management skills. By having money they can spend as they like, kids learn to manage it on their own. They learn that they can’t afford everything they want. They can make mistakes, such as buying a toy that’s cheap and poorly made, and breaks quickly. Or they might buy a candy bar, and realize it’s gone five minutes later and wasn’t worth the expenditure. Conversely, they can learn the joys of delayed gratification and what it means to save up for something they really want.
There may be fewer arguments about money. Giving your child an allowance means you can make it your child’s responsibility to pay for the “I want” items like toys or fancy shoes. Your child may learn to stop pestering you to buy something for them, and realize that it’s up to them to earn and/or save up the money to pay for those “I want” items.
When tied to chores, an allowance can teach children the concept of working for money. By having to do specific chores in order to receive their allowance, children may develop a greater understanding of what it means to get paid for doing work. They may also learn the value of hard work to earn more money by doing extra chores and receiving more pay.
The Cons of an Allowance
The arguments may not stop. Even if you give your child an allowance, the “I want” chant may not end. Your child may simply protest that his or her allowance is insufficient, expect to get paid for every task done around the house, and/or compare his or her allowance to that of friends.
Allowances can be tricky. There’s disagreement among experts about whether allowances should be tied to chores, or freely given. There’s also no consensus on the “right age” at which to start an allowance, or how much to give. You can start when kids are old enough to differentiate between denominations, or wait until they are hounding you for wants that you don’t want to pay for. You can give $1 per year of your child’s age, but you might find that his or her peers are getting much more (or less).
Allowances aren’t the only way to teach money management skills. Whether or not your child receives an allowance, it’s important to talk about the skills needed to manage money, and give your child a solid foundation in personal finance. Even children who don’t get an allowance can understand the idea that they can’t have everything they want, and that they have to prioritize their wants.
Thus, whether or not your child receives an allowance, be sure to discuss the ideas of earning money, saving money, taxes, investments, debt, interest, and all the other topics that will help set your child up for financial success in adulthood.