Are you spoiling your child $5 at a time or creating the next financial superstar? This is the bottom line on rules for giving your kids allowance.
|Bottom Line/Personal:||What’s the deal? Should parents be giving their kids an allowance?|
|Thomas J. Henske, CFP||Absolutely, they should. Think about it. If you were sending your child to go play tennis or practice tennis, would you ever send them out to play without a racquet? Well, think about what you’re doing. You’re trying to teach your kids about money, and what are you trying to teach them? How to save, how to spend, invest and donate—and the way to do that is by putting money in their hands for them to go out and practice.|
|Bottom Line:||Cool! What is the right way to do it? How do you go about giving your kid the right type of allowance?|
|Thomas Henske:||I like to give $1 for every year old they are, so if you have a six-year-old, he or she gets $6…if they’re 10 years old they get $10. Give it to them once a week, usually on a Friday (seems to make sense), and then let them go and spend it on what they want.|
|Bottom Line:||Are there mistakes that people typically tend to make? What are the big pitfalls about allowance-giving?|
|Thomas Henske:||The big pitfall is trying to control what your kids are spending money on. Remember, this is practice, so you want them to make mistakes with $200, as opposed to later in life making a mistake with $200,000. They get that by practicing. The second thing is don’t hook it to chores. Make sure that when your children go to college, they still want to make their bed not just because they’re getting paid. And then finally, don’t use it as a disciplinary action. Don’t yank the allowance away because they didn’t act in a way you thought was appropriate, maybe in school or on the playground.|
The bottom line on allowance—yes, give it. Definitely think about how you’re using it to teach your kids about financial independence, which means don’t tie it to chores or behavior. Don’t micromanage them—let them spend it as they see fit, and think about the guideline of $1 per year of age per week