6 Tips on Giving an Allowance for Kids & How to Avoid Any Problems

There is absolutely no doubt that raising a child is hard work. Among the most important things to give your kid, providing lessons about handling and managing money is at the top of the list. One of the most crucial points regarding the financial education of children is setting up an allowance for them. Even though having an allowance for kids is mostly a good idea, there are problems that can appear as a result.

With that in mind, the present guide will shed light over some of these problems. Additionally, it will provide valuable tips on how to do it in a way that is satisfactory for all parties involved.

a small pink piggy bank placed on a large pile of dollar bills

6 Tips for Giving Kids an Allowance

1. Make a Plan

Before anything else, it’s highly important to make a plan that rounds up every aspect of the allowance-giving process. This includes the amount, the frequency of the payments and the conditions that have to be met by the child in order to get a payment.

Additionally, it’s always a good idea to be clear regarding the kind of things that the child can buy with their newly-earned money.

2. Have a Sit Down

Once you have figured out all the details, make sure to have a conversation with the child explaining every aspect of the plan. Describe all the rules thoroughly and clearly while making sure to emphasize what the consequences will be if they are broken.

To avoid future problems due to miscommunication, provide a list of the things the child can buy with this money. Simultaneously, be sure to give your child another list detailing everything they can’t buy using their allowance money (for example, fireworks, candy or video games).

3. Use it as a Learning Tool

One of the most important reasons for having an allowance for kids is that it can be a great learning tool. Apart from valuable financial lessons, an allowance can teach kids about responsibility, common sense, self-reliance, organization, delayed gratification, and socialization in general.

Make sure to be firm in terms of enforcing your own rules. Of course, kids being kids, at some point they will make mistakes. Still, mistakes are an important part of the learning process, particularly when you are there to explain what went wrong and how to avoid it happening again.

4. Teach Spending, Sharing and Saving

Most experts that recommend setting up an allowance for kids agree that it’s a great opportunity for teaching them not to spend everything they have. With that in mind, it’s a good idea to have kids buy into the concept of spending only a part of their weekly allowance.

The part that is not spent can be saved in a piggy bank or shared with others, especially those who do not have the luck of getting an allowance.

a simple table with several chores for kids to receive allowance

5. What About Chores?

One of the most divisive questions regarding having an allowance for kids is whether they should work for it or not. Without a doubt, withholding the allowance whenever the child refuses to do chores will teach a lesson.

However, the impact of other important lessons that can be taught through having an allowance will be diminished. There is no easy solution to this conundrum. However, whatever you decide should depend on the kind of lesson you think is more important for your child to learn.

6. Consider a Bank Account

Besides teaching about basic concepts regarding finances and life in general, having an allowance for kids can be the first step in providing lessons about fiscal responsibility. Once your child reaches a certain age (around middle school) it can be a good idea to get them a bank account.

Having a bank account is guaranteed to teach your children lessons about investing, earning interest, balancing a checkbook, and creating a fiscal budget. Still, it’s important to make yourself the custodian of that account, eliminating the possibility of deception and early-life financial problems.

How to Avoid Problems When It Comes to Having an Allowance for Kids

There is no doubt that kids need to learn how to manage their money. By having and managing their own money, they learn important concepts such as saving, planning, setting up goals, and delaying gratification. Additionally, having a small amount of money each week allows kids to make low-risk mistakes and to learn from them.

several transparent jars for kids' allowance

1: Begin This Process When the Time Is Right

Having an allowance for kids is definitely a good idea. Nevertheless, it should be done correctly in order to function to the advantage of your family. One of the main things to consider is when to begin having an allowance for kids. Many families start when their kids are five or six years old.

Others like to wait until the children are older than nine or ten. However, psychologists agree that the best time to start giving your children an allowance is whenever they begin to comprehend the concept of money.

2: Provide the Right Amount of Money

Another important thing to take into account when considering an allowance for kids is the amount. Without a doubt, it is a figure that will depend on factors such as your income and the area you live in. However, it’s also important to have a balance.

For obvious reasons, you definitely do not want it to be too little. However, giving a child too much money can be dangerous as it will send the wrong message and paint an inaccurate picture of how life works.

Summing It Up

In conclusion, having an allowance for kids is considered by most experts to be a positive thing. However, it is something that needs to be properly if you want to achieve good results and a positive outcome. It’s important not to lose sight of the main goal: teaching kids how to be financially responsible.

By following a few basic rules, you can reward your little ones while providing them with valuable lessons that will last a lifetime. Do you have any tips of your own regarding having an allowance for kids? Let us know in the comments!

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