In my previous posts, I began a conversation about teaching your children financial responsibility. I'd like to spend the next few posts discussing the pros and cons of allowances.
Parents often have concerns about offering allowances to their children. On one hand, allowances allow children the opportunity to learn about money management and learn the concept that our individual labor is worth money. On the other hand, it is perfectly reasonable for parents to believe that children should help out with basic household chores as they are members of the family and the family unit needs to work together to accomplish the household tasks.
If you choose to have your children earn their allowance by doing chores, set clear standards for the chores. What chores need completed? How frequently? And how much does completion of each chore earn the child? Consider creating a chore chart to keep track of what chores are completed each week. I don't recommend an all-or-nothing approach to allowance. By doing so, parents aren't recognizing the positive side of your child completing at least some of his/her chores. Furthermore, it isn't based on real-world principals. After all, as adults, we don't lose an entire week's pay if we take off early one afternoon.
If you don't want to tie your child's allowance to chores, consider setting up a formula. For example, your child earns $1 each week per year of age. For example, an 8 year old child would earn $8 a week while his 6 year old brother earned $6 per week. Keep in mind your own budget when setting up your formula.
It's important to remember that a child's allowance shouldn't be enough for him/her to purchase all of their wants each week. One of the goals of giving children an allowance is to teach money management. If your child never has to delay gratification by saving some of his/her allowance to make their purchase, you aren't teaching them real-life financial principals.