Allowance and Money Management Health Article

Definition

An allowance is money earned or given to a child at regular intervals to teach the child how to manage money.

Purpose

Parents differ in their opinions about giving allowances to their children. Some parents believe that they should provide for the material needs of their children, and there is no reason a child should have to manage money until they are old enough to understand the working world and mature enough to make responsible purchases. Other parents feel that giving their children allowances is a good way to teach them about money and financial responsibility. If parents decide to give their children allowances, there are several ways to do it. How much they receive, how often they receive it, what they may spend it on, and whether the children must earn their allowance by completing chores at home are all questions for parents to consider.

Description

School-age children are starting to develop the cognitive skills necessary to understand basic monetary ideas, such as identifying coins, counting change, and matching small amounts of money to items they want to buy. Apart from introducing children to basic economics, money lessons have other benefits. Money illustrates parental values and teaches children about the relative worth of things, time, and effort.

When to start an allowance

Children younger than five are not mature enough to understand money management. They usually resist saving money and tend to spend money right way. Older children are more likely to take responsibility for their money. As they learn math skills, children are more able to calculate expenses. They can begin to figure how much they need to save for a item or how much they will have left over after buying something.

By the time children are five or six years old, they may be responsible enough to handle small amounts of money. Before starting an allowance, parents may discuss budgets with children and what children want to buy. They may shop with their children in stores on online and discuss prices.

The amount of allowance is a personal choice for parents. Young children may be given one or two dollars, while teenagers may be given ten dollars or more. Some families will give close-in-age siblings the same amount of allowance, but general practice is to give older children more money than younger children.

Young children may be given enough money to buy small items such as trading cards, hair clips, or ice-cream bars. The next time parents go shopping, the children can bring their own money if they think they might want to buy something. If they have already spent their allowance, then they have to wait for the next allowance before buying something else.

Building financial skills

Parents may want to reinforce lessons the children learn in school by making a chart that shows basic money equivalents. They may choose to post it on the refrigerator or in the child's room. Playing store and putting price tags on things around the house teach children relative worth of items.

Like adults, children may have trouble saving money. If a child wants to buy an item that costs more than his or her allowance, parents may choose to be flexible. They can allot the child an extra allowance or help the child figure out how long it would take to save the amount from future allowances. Parents may offer to provide matching funds, contributing a dollar for every dollar the child saves.

Some parents devise a category system to help their children manage their allowances. The first category is short-term expenses, money the child may spend right away on whatever he or she wants. The second category is savings, money put in a special jar, where its gradual accumulation is visible. This money is used for items the child wants that cost more than the weekly allowance. The third category is charity, money for church donation or a local cause, for example, or for gifts. The parents may decide how a younger child's allowance should be divided among the three categories, or the budgeting may be left up to an older child.

Allowances and chores

Many people believe that child's allowance should not be tied to household chores. Children should help out around the house because they are part of the family, not because they are paid. Allotting children chores that are proper to their abilities teaches responsibility and makes them feel the worth of their contribution to the family. The sense of belonging and empowerment gained by being an inherent part of a family team is important for children. Children learn to contribute something valuable and realize that others depend on them to do their part. This relationship raises self-esteem and allows children to see themselves as active and valuable participants in others' lives.