This is the second of three posts about Allowance Best Practices (ABPs). The first, “Don’t Get Burned by Giving Allowance Without Structure” was published on March 4th. The third will be published on April 1st.
Once you’ve made the three broad decisions (explained in our most recent post) required to ensure that allowance will accomplish its intended goal (which is to give kids practice earning, budgeting, and spending money), you might be wondering about age-specific guidelines. Certainly, you don’t give an 8-year-old the same amount or leeway with an allowance that you extend to a 6th Grader or High School Student. This week, we are going to focus on ABPs for kids 12 and under. We will tackle allowance methods for teens immediately after Spring Break.
How much?
When younger children receive allowance, a frequently used rule of thumb for the amount is some multiple of their age over a given period of time. You can give a 10-year-old, for example, $10 a week, biweekly or monthly. Up until age 12, it is hard to imagine why they would need more than $48 a month in spending money. Your family may have good reasons why a larger amount is appropriate; making the amount some multiple of your child’s age is just a simple way to both 1) remember what the agreed-upon sum is and 2) keep spending in check with what not-yet-teens are usually able to handle.
Cash or plastic?
Younger children, in particular, need the visual cues they receive when physically collecting and spending money, so you may want to give them actual bills and coins and a safe (but not too accessible) place to store them.
We’ve heard about families that use everything from mason jars to bathroom drawers – and it really doesn’t seem to matter what is used. What you want is for your kids to become comfortable handling money, counting it out, and experiencing both the joy and concomitant loss of spending it – which happens best when using cash versus gift cards, IOUs, or heaven forbid, for anyone 12 or younger – plastic.
At-home payroll savings plans.
The sooner you can get your kids into the habit of saving and giving some of their allowance, the better. This can be accomplished by adopting the home version of a payroll savings plan for kids 10 and older – where their allowance is actually $10 a week, but they only receive $8 and then have $52 in each of a savings and charitable giving “account” at the end of the year. They can look forward to determining which good cause they would like to support or what more meaningful purchase they might ultimately spend their savings on. Getting comfortable with putting real distance between wanting and getting is the cornerstone of being able to live within one’s means – and it will never be easier to establish such a habit than by starting young.
Help extended family members spend their gift-giving dollars wisely.
When your not-yet-teenagers desire items that lie completely outside of their spending ability, ask them to use the DIMS-DOES IT MAKE SENSE?® SCORE Calculator and share the results with family members who want to know what “the kids” would like for an upcoming holiday or birthday gift. The DIMS SCORE® Calculator is free and safe. It helps youth work on a problem that matters to them in real-time: Should I buy this item or experience?” Why not ensure that even extended family gift dollars are only spent on items that will really be used and appreciated?
Prefer gift-giving to be carefree when your kids are young?
For those who believe that childhood should be a time of completely unfettered gift giving and receiving, personal finance writer Ron Lieber cautions that neglecting to teach your kids money-smarts, rather than protecting your child’s innocence, might only give them the idea that money is neither scarce nor valuable.
Introducing children to spending with a plan doesn’t mean they can’t still have incredibly memorable birthdays and holidays. It just means those incredible memories will be “gift-wrapped” in some quick but meaningful early personal finance lessons. Done properly, allowance for younger children will allow your kids to begin adolescence with some nicely developing money management skills. Of course – there is still lots for them to learn once they turn 13!
To learn more about our approach to early financial education, click on the blue or green buttons below.
Allowance For Parents Gifts & Holidays
