Allowance can be a difficult topic to talk about. You want to be sure that your child learns about money but when does an allowance cross the line into spoiling your kids?
Roughly seven in 10 parents give their children an allowance, according to a recent survey of more than 1,000 parents by The American Institute of Certified Public Accountants. On average, kids get $67.80 per month ($814 per year), up from roughly $65 per month in 2012, and roughly one in four kids gets $100 or more per month.
Allowance can be a great way to get children accustomed to handling and talking about money so it’s not so much the amount as the conversation around it — how they can save or spend it. When you give your kids an allowance, encourage them to save at least part of it to teach them delayed gratification and save over time for items that they want. It will also help them develop saving as a habit. It’s recommended that your children save roughly one-third of their allowance each week.
Here are 5 mistakes that are commonly made when giving allowance:
1. Not expecting your kids to work for it
Teach them at a young age that money comes from hard work, and rarely does it come from anywhere else. Give them a few chores, while being careful to remember that they are still children and perhaps re-shingling the roof isn’t the best “chore” for them. If they do their chores as expected, every week, you hand over the money they have rightfully earned. With it comes a sense of accomplishment and good habits are being formed.
2. Paying them for things they should be doing without reward
Things like putting their dishes in the dishwasher or picking up their toys should be expected of them with or without pay. One thing that parents often pay their kids for is babysitting their siblings. Is this really something that should be rewarded, or should family just be expected to take care of family without the promise of a twenty dollar bill? No, give your kids chores like cleaning the bathroom or taking out the trash. Pay them for weeding or doing the laundry. Don’t pay them for things they should be doing just to meet the basic requirements of being a contributing member to the household. They’re not going to get paid for cleaning up after themselves when they’re older, so why teach them to expect that now?
3. Giving them too much money
You remember when you were seven years old, way back in the pre-internet days, asking mom and dad for another quarter to play the pinball machine at the mall? Mom would always wag her finger while repeating the same old mantra, “money doesn’t grow on trees, you know!” Barely into your adulthood, the reality that mom was right smacked you in the face like Mike Tyson’s left. Giving your babies too much money might take away the opportunity they have to learn how to budget and save.
4. Giving them too little money
The amount of money you give your kids needs to be a motivating amount. If it’s too little, they won’t care if they earn it or not, because it’s really not enough to do anything with.
5. Buying them a piggy bank
If they’re old enough to save money, they’re old enough to do it in a savings account. Take your kids to the DFCU Financial, open them an account and use this opportunity to teach them about banking, saving and interest. And, have them earn Cash Back, too!
Teaching your kids about money isn’t all that hard, if you’re consistent, fair and expect them to give as much as they get. We all have that urge to spoil our kids, pouring gifts on them every chance we get. We have to resist this urge and look forward to the excitement of watching our babies grow into savers with good credit and financial independence.