Money is power. It provides us with freedom and choices. Maybe this is why some parents are scared of giving their kids an allowance. They fear it might undermine their parental authority and they will lose some control over their kids. But an allowance is incredibly beneficial for most kids, and here’s why.
1. It teaches kids financial responsibility
The best age to start giving kids an allowance is when they start understanding how money works. Around 5 or 6 years old is probably the most common age to start, but it depends. If your kid still doesn’t care about money or has no interest in either saving or spending, you can always wait before giving them an allowance.
But once children begin to warm up to the “money buys things” principle that seems to be the center of modern life, an allowance is a great tool to teach them how to be responsible. It won’t take long for the kid to understand that, if they want that really cool toy, they should start saving up their money. This means that they will really think about what they want and need (is it worth it not to buy candy now to get that toy in a month?), and introduce the concept of delayed gratification.
2. It gives them some independence and control
There is something incredibly empowering about being able to buy something you want with your own money. This doesn’t mean that kids should get complete freedom when it comes to deciding where the money will go. You are still a parent after all, and if you decide that fireworks are not appropriate for a five-year-old, then the fireworks will not get bought. A good way to balance this is to let your kids know from the beginning that they are free to spend their money however they want as long as it’s not problematic. An ugly shirt? Let children make their own mistakes. Five pounds of gummy bears? Maybe step in to teach moderation. With time, children will learn to weight their options and make better decisions.
3. It teaches kids about budgeting
When coming up with the appropriate amount of money to give your kids every week, there are different approaches you can take. For example, you can opt for the classic formula of fifty cents (or a dollar) for every year of the kid’s age. This one is easy because there’s no discussion, the younger siblings understand why the older ones receive more, and everyone gets a raise on their own birthday. When your kids are older, they can negotiate with you for a larger sum of money. You can discuss together what their needs are and why they want more money. However, consistency is more important than the exact amount of money your kids receive. Make sure to give them their allowance always on the same day and avoid giving them “advances” or “loans” too often. If they run out of money mid-week, they will know to be more careful the following week.