It’s never too early to learn the importance of budgeting and saving money. Most parents start this lesson early-on by giving their children an allowance.
The concept of an allowance for kids is pretty simple. Parents give the child a set amount of money per week based on chores and other household duties. This helps kids understand that you have to work and save for the things you want.
Every family has different rules surrounding an allowance – some require the child to save a specific amount before spending it whereas others let the child buy whatever they want. After all, it’s their money.
Both approaches help teach the value of a dollar and the importance of budgeting.
Does all this sound too good to be true? It might be.
Keep reading to discover the pros and cons of giving your kids an allowance.
Pros of an Allowance for Kids
We’ve already touched on some of the benefits of giving your kids an allowance. Let’s delve a little deeper.
Teaches the Value of a Dollar
As parents, it’s your primary responsibility to care for your child. You provide them with food, clothing, and shelter – all the things they need. For many children, these things are taken for granted.
Although this is age-appropriate and completely normal, it’s sometimes difficult for children to understand the true value of money. They know you go to work every day but they don’t fully comprehend that it takes work to pay the bills.
When you offer an allowance to kids for performing household chores, they begin to understand the concept of earning money. To help children fully grasp the concept, require them to use the money they’ve earned to buy the things they want.
Whether it’s a pack of gum or a new video game, they have to perform their chores each week and save their allowance to get what they want. This is laying the foundation for responsible budgeting.
Speaking of responsibility, giving your kids an allowance is a great way to hold them accountable. Give your child specific jobs around the house that they’re responsible for. If they don’t do them, you can deduct a small amount from their allowance.
This also helps create a connection between work and getting paid. Your child will soon realize that it takes hard work they don’t enjoy in order to earn money. This is helping prepare them for the real world.
Helps Children Learn from Their Mistakes
Making mistakes is a part of life. Your child is the perfect position to make low-risk financial errors. It’s better they make these financial missteps now when the damage is minimal.
Another way to teach responsibility is by letting your child spend their money however they want. Once they waste it on a few frivolous purchases, they’ll think more carefully before they spend it again.
This concept teaches work ethic, also. After spending weeks doing chores and saving their money, your child will learn to avoid impulse purchases.
Cons of an Allowance for Kids
With so many life lessons to learn it seems impossible that giving an allowance for kids has a downside.
Here are a few things to consider before you start shelling out the cash.
It Costs You Money You May Not Have
Most parents give their child a small, reasonable allowance. This might range anywhere from $5 to $15 per week. And while that doesn’t sound like a huge amount, it can add up fast! This is especially true if you have more than one child.
Giving an allowance to your kids is additional money out of your own pocket. This might be an expense that you simply can’t afford. Do the math and figure out how much money you plan to give your child and what that equates to each month.
You Need to Supervise Spending
Is your child eager to earn money? Are they just as eager to spend it? This could cause a problem if you don’t closely monitor their spending.
With online gaming stores, in-app purchases, and other Internet temptations, your child might end up spending more than you want them to. They might also end up blowing all of their money on useless items that fill your home.
Before you start giving your kids an allowance, make sure you sit down and discuss the parameters and rules of the arrangement.
For younger children, you may need to approve every purchase they make. You can give older children a little more leeway, but be sure they don’t overindulge too often.
Children Will Lose the Sense of Family
Some people argue that children shouldn’t be rewarded for helping around the house. Things like making their bed, taking out the garbage, and helping keep the home neat and tidy should be requirements, not rewards.
If you feel this way, you can try a different allowance approach. Try giving your child a very small amount of money each week regardless of what chores they perform. That way, the concept of making money isn’t tied to tasks that are simply part of family duties.
This still teaches responsibility since your child is responsible for budgeting and saving the money they receive. It also prevents kids from skipping out on chores when they’ve saved enough money and lose motivation to work.
Deciding on the Right Allowance for Kids
Are you considering giving your kids an allowance? If so, you’ll want to weigh the pros and cons before deciding.
An allowance for kids is a great way to teach responsibility, worth ethic, and the value of a dollar. On the other hand, it can be financially draining and require you to closely monitor their spending.
Need help sorting out your own personal finances? Learn myths about personal loans here and how Bonsai Finance can help.