Four Ways to Make the Most of Your Child’s Allowance

How to Make the Most of Your Child’s Allowance

Child's Allowance Jar
Child’s Allowance Jar

Paying children an allowance is a popular way to teach them about money. Unfortunately, most people do it wrong.

You can’t just give wads of cash to your child and expect them to learn what to do with it. Giving them an allowance has to mean a lot more than just giving them money.

If you want your child to grow up with a healthy relationship with money that will serve them in their adult life, make sure you follow these four tips.

Don’t Just Give Them Cash

The quickest and easiest way to pay a child is to give them cash. Although it’s a concrete way for them to see their hard work pay off, it isn’t the most relevant form of payment in today’s world.

Instead, let your child practice with electronic money by sending them cash. Deposit it into a bank or head to the store together to pick it up. It’s a lot closer to what an employer would do when it’s time to pay their employees.

Know How Much to Pay Them

Do you know how much to pay your child? Little kids don’t need tons of spending cash, but teens don’t necessarily need large allowances either. So, what is appropriate?

There are generally two ways to think about paying your child. The first is dictated by your child’s age. You can pay them a dollar, or two, for every year, depending on your local economy.

The other method involves pricing chores accordingly. For example, repainting the house would pay a lot more than taking out the trash.

Make Sure They Actually Earn It

You don’t want your kid to get into the habit of thinking they will get paid to do normal household chores. After all, no one will pay them to do the dishes or vacuum when they are an adult!

Instead, provide them with a modest weekly base pay for doing their regular chores. Then, pay other chores separately. Some examples include paying your child to:

  • Pick up a sibling on the way home when you have to work late
  • Pick up a few things from the grocery store
  • Plant new flowers in front of the house
  • Pick up sticks in the yard before mowing
  • Lay salt on the sidewalk in the winter

Help Them Create a Budget for Their Money

Earning an income doesn’t mean it all gets spent. Giving your child an allowance should automatically mean you also talk about how to budget their money.

Talk about your child’s goals for their money. Then, help them decide what kinds of savings accounts they should have, and how much of their weekly allowance should go into each one.

Giving your child an allowance is a great first step towards financial literacy, but you’ve got more work to do as a parent to make sure they get the most out of their money. With these tips, you can help them understand money better, which in turn, will make it easier to manage when they grow up.

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