Smart Talk about the Kids' Allowance

How much to give your kids for an allowance is a decision that parents should decide based upon a number of factors. Some experts suggest that giving an allowance to your child by assigning a dollar value to chores is the way to go; others, conversely, reject that idea. Still others propose that an allowance amount should be equal to your child's age; in other words, if little Jimmy is four years old, a weekly of bi-weekly allowance of four dollars would be sufficient.

While it can reasonably be argued that the first method is a great way to teach your child the value of work, but not necessarily the value of money, many parents nonetheless use this technique to determine how much they will regularly give their kids. But, the latter opinion regarding age and the allowance's dollar amount may also pose certain problems. While kids at the age of four, for example, can be taught the value of money, they may also have a natural tendency to misplace or lose that which they're given.

One of the determining factors that parents should use is that of expectations, both for the child personally and of how it's likely that he or she will use the money. For instance, how would four-year-old Jimmy utilize his four dollars? Well, with no supervision, optimistically he might be expected to put one of those dollars into a piggy bank, but the rest would very likely be used on toys and candy (not necessarily in that order). As kids grow, however, they should be actively taught how to responsibly handle the allowance they're given and be able to use the money for a variety of reasons. Of course, the true test comes when they spend all their current allowance and then approach the parents to ask for an advance on the next 'paycheck.' This is one of the key points at which they'll more fully come to understand the value of financial responsibility.

Of course, all this is not to suggest that special chores such as washing the family car or cleaning out the garage don't deserve compensation. It's up to the parents to decide the appropriate amount to be given for these activities.

There is no fixed amount that kids should be given as an allowance. Many experts advise that a four-year-old should be given a minimum amount. By the time the child is five the allowance can be increased, and by age nine he or she should have a fairly keen understanding of how to manage the money, again with the proper supervision of parents. For example, along with the allowance, limits may be set as to the types of purchases that can be made, with explanation given as to what's appropriate and what isn't. Parents may also decide to require that a certain portion of the allowance be set aside in a savings account.

While there will likely be occasions when kids may buy an item that, for all intents and purposes, will reduce their savings to zero, it's nonetheless an important lesson to be learned. Except under extenuating circumstances, the parents' most productive role in such a situation would be to refrain from replacing the money spent, but continue the weekly allowance as set forth from the beginning.

How much you give your kids for an allowance should come down to how well you teach them the value of each dollar given and the responsibility they ultimately exhibit as their funding begins to grow.