Considerations in Paying Weekly Allowances to Children

Parents of young children often face the dilemma of determining when and how much allowance to give their children.

Obviously, there is no one answer as circumstances such as family income, the number of children in the family and what expenses (such as clothing) a child is expected to pay out of his or her allowance vary significantly from one family to another.

Most parents begin giving a child an allowance when the child begins elementary school.

Some parents use a rule of thumb that suggests allowances should be equal to one dollar a week for each year of age. Once again, the amount given must consider whether the child (Particularly teens) is expected to buy clothing or other personal needs out of his or her allowance. If they are, the allowance must be adjusted upward to cover these expenses.

Another important consideration in determining how much allowance to give a child has to do with whether some portion of the allowance is based on chores performed. Some parents pay a smaller allowance and then give the child an opportunity to add to his or her allowance by completing designated chores. For example, children may add to their weekly allowance by cutting the lawn, raking leaves, shoveling snow, washing dishes, etc.

While some parents feel strongly that the bulk of allowance must be earned by completing assigned chores, other parents take the position that a child should do assigned chores without the added incentive of cash payment and the final reward for this good behavior is in a fixed and adequate weekly allowance.

All parents agree in the importance of teaching children how to use money responsibly.

Even very young children can begin to understand the value of money as they watch their parents pay for items at the checkout register or as they withdraw money from the ATM or pay bills. As the child expresses an interest in money it is time to teach him or her the value of each coin and the varying values of paper currency. This is a good time to help the child understand the relationship between the amount of money (coins or dollar bills) and the number of items that can be bought. Too often children grow up with a poor understanding that there is a limit as to what can be purchased with a given amount of money. In this credit driven society adults failing to understand this often build credit card balances that are far beyond their means to pay off pushing them into bankruptcy.

Once the child begins receiving an allowance parents should help the child understand the value of saving some portion of his or her allowance. This can be done by explaining to the child that saving some portion of his or her allowance will allow the child to put aside money for a future purpose whether this be a more expensive toy, a musical instrument, a book or some unknown future purchase. To encourage a saving habit some parents buy a piggy bank and give it to the child when the first allowance is given. Encourage the child to drop several coins in the bank from each weekly allowance and encourage him or her to continue saving and to fill the bank. Once the child has achieved his or her goal of filling the bank this can be rewarded with the purchase of a special toy or book.

Starting a savings habit while children are very young can develop into an important money management discipline that follows the child into adulthood. Many children who were encouraged to build savings in a piggy bank while very young follow through with savings accounts as they reach their teens and become responsible enough to given the use of a credit card as they enter college.

While children should be encouraged to save some portion of their allowance parents should not dictate how the allowance should be spent. Children, and in particularly those who have saved some portion of their allowance, should be free to enjoy earned allowances whether it is spent on movies, books, candy or toys. The one important exception to this rule is that allowance money should never be allowed to buy items the parents have clearly banned from the home. This would include items like ultra-violent video games, "X" rated books or videos, cigarettes, etc.

The awarding of weekly allowances to responsible children can be beneficial in developing an important relationship between parents and children. It gives the parents a rare opportunity to teach children the value of money and how to use it wisely. This is a lesson that can help a child throughout the rest of his or her life.

For the child, in addition to having money available to spend as they see fit, the payment of an allowance is another form of recognition by parents. It is another measure of parental approval and acknowledgment of the child's contribution to the family unit.

Both parents and children should not underestimate the value of maintaining expectations and commitments implicit in the awarding of allowances.