Should parents give their children an allowance?
This is a surprisingly difficult question to answer. Teaching your children how to handle money is important, but how you go about giving them cash can set precedents that last a lifetime.
Here are a few methods to consider about giving your kids money:
Don't do it.
There’s a lot to not love about this system at a glance, especially if you’re the kid. It seems like a way to simultaneously prevent your children from having fun and learn nothing about handling money. But it has some silver linings. Not paying your kids to do chores can be a way to teach them about the value of work without tying it to a monetary reward. That’s an important life lesson that can be applied to volunteer work and responsibilities with their future family. You also may be on a tight budget and handing out an allowance is just not part of your financial strategy right now. Don't feel pressured to hand out an allowance just yet.
Give your kids an allowance (with no work required).
This is a system where you give your kids a set amount of money each week or month. This is a straightforward way to allow your kids some cash that they can spend, save, and use so they learn how to handle money.
But just giving your kids an allowance without requiring something in return, like doing chores, has some potential drawbacks. Most people will eventually have to get a job so they can earn money. Giving cash to your kids without tying it in some way to work may create a sense of entitlement that simply isn’t realistic. This method may be considered a stepping stone to learn about money or can be tied directly to gifted money (think birthday and holidays).
Pay your kids a commission.
In this system, you pay your kids as they complete tasks. You would set up a job posting with different payments for different chores. Pay your kids when they’ve completed the work. If they get the job done quickly with a good attitude and some extra flourish, then give them a raise! It’s a great way of rewarding excellence and teaching children the monetary value of their time and hard work.
However, this system also has its flaws. Some of the most rewarding work we do can be for family or friends, or to serve our communities—with no reward other than appreciation, knowing you helped others, and pride in a job well done. Giving the impression that one should only put in hard work or help out with the family for cash isn’t something every parent is comfortable with.
Fortunately, there are many ways to combine each of these systems.
You may consider having non-paying chores that are duties simply because the kids are members of the family along with some extra paid jobs. Maybe you could offer a base allowance to teach your kids about saving, giving, and spending, and then add some weekly or monthly paid chores. These systems can also evolve over time as your kids grow and mature. Let the needs of your family and what you want to instill in your children guide you.
Femi is a financial professional on a mission to educate 30 Million families in North America by 2030. Find more about what she does at https://wsbcampaign.com/phemmyade