Allowances Are A Great Way To Teach Financial Responsibility

Have you asked yourself if you should give your child(ren) an allowance?  I can’t tell you if you should or shouldn’t.  I believe that’s a household decision.  But I can tell you why we give an allowance to our kids.  So let’s rephrase for a quick a moment.

Do you give your kids an allowance?  The answer is, YES!

An allowance provides our kids with a lesson in financial responsibility.  Each month they receive a specific amount for their personal use.  They are paid on the first of each month by either bank transfer or cash in hand.  The bank transfer mainly happens for our eldest since she’s old enough to have a checking account.

If you would’ve asked me about giving kids an allowance a few years ago, I would’ve been against it.  However, we started giving out allowances when each child turned ten.

Their allowance is NOT connected in any way with household chores.  Household chores are just part of life and being in our family. Believe me, if they do not do their chores there are consequences.

Reason Why We Do Allowances

Allowances are used for all the extra and nonsense things they may want, want to do or want to go.  We purchase all of the necessities, but let’s say they want an $80 shirt.  We may agree to only spend $50 on shirts (notice that s), but if they want to purchase one for $80, that’s fine.  They must pay the additional $30 plus tax.

Kids only see parents swipe a card or hand over cash.  There is little to no connection with knowing it takes some planning, sacrifices, and savings to do and have nice things in life.

We decided we wanted to teach and give our children some practice with financial responsibility before they head out in the world.  They each put money aside to donate to whatever they choose.  It may be to charity, special gifts to a friend and money in their savings accounts.  Money set aside for a “big” purchase and spending.

One works from a ledger and has it down to a penny on what’s in her pocket, her bank savings and her “big” purchase savings.  She’s big on giving to charity and always willing and ready to pass you a dollar or two.   Another knows to the penny what her siblings owe her and has an interest rate out of this world, but I like her style when it comes to finances.  Then we have Ms. debit card.  She keeps a mental note as she swipes, but has a pretty decent minimum amount to have in her checking account.  She is excellent with savings.  Has expensive taste, but will ask for her military discount to help save a few bucks. And if she orders online, she will use Ebates to save!

So, in a nutshell.  We think giving kids an allowance is a great thing.  We use and feel allowances are a great way to teach financial responsibility and hopefully will set them up with great money habits when they leave home and enter the real world.

Do we give our children opportunities to earn money? Stay tuned for a follow-up post.  We all know that money doesn’t grow on trees.

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