Don’t Get Burned by Giving Allowance Without Structure
The argument for allowance goes something like this: You get better at spelling, multiplication, basketball and cooking by practicing, and so it goes with handling money. Most of us do not live on farms where there is an abundance of work to be regularly completed; even jobs outside the family home for older school-aged children are harder to come by these days, so allowance is seen as one of the only ways left for kids to practice earning, budgeting and spending. But allowance only helps children develop money-smarts if it is delivered with some well communicated age appropriate structure.
From everything we have lived, read and heard, the most effective approach seems to be providing your kids with a basic amount of spending money, untied to chores, but giving them the opportunity to top that amount up by completing non-regularly occurring tasks, such as seasonal yard work or larger home maintenance projects. Parents aren’t paid for doing laundry, making meals or driving someone to dance class, and you want your kids to know that some things are just expected of them because that is what it is to be part of a family. But people who work extra hard and go above and beyond the normal call of duty are typically rewarded, and you want your kids to learn that lesson as well.
Allowance only helps children develop money-smarts if it is given with some well communicated age appropriate structure.
Determining what your child’s allowance is to be used for will typically dictate how much you plan to give them. And assuming they understand the money they receive every Saturday morning should not be spent on a trip to the candy store rarely works. Just like when first learning how to spell, multiply, or play basketball, the fundamental model of how and what to do needs to be presented. For example, if you want your kids to save and/or donate part of their allowance, you need to tell them.
Age-specific guidelines for parents to consider when establishing allowance are going to be split into two future posts, but there are three broad decisions to make and communicate, regardless of age:
Decide what allowance is to be given and used for, e.g. given for set chores or not, and to be spent on sweets, savings, lunches, team fees…or not.
Decide how allowance will be distributed and stored, e.g. using envelopes, jars, automatic bank deposits or virtual tools such as FamZoo.
Decide when current practices will be assessed for any required adjustments.
Kids won’t always spend their allowance exactly as suggested, which is OK because that is typically when they really learn about the scarcity and value of dollars. When they spend too much on liquorice or lattes and then don’t have enough for a special event at school, or a t-shirt celebrating their favorite sports team or musical artist, chances are, they will think twice before spending on quickly consumed items again, which is exactly what you want. Naturally, we believe the easy way for kids to make sure they spend their allowance as wisely as possible is to use our Gift Surveys when planning larger more meaningful purchases. Gift Surveys help kids quickly answer all the questions parents normally want addressed before agreeing to spend money and drive home the habit of thinking before buying.
You could just give your kids pocket money every weekend, or when they ask for it, without guidelines or expectations. Unfortunately, our research and experience tells us that this does nothing to help prepare them for their futures as post-secondary students, employees, spouses, homeowners or parents. Some people have even found that when you simply hand money over, you might as well light it on fire. At Gifting Sense, we’d rather families put a small plan in place, and avoid getting burned.