Allowances Are Important

When money gets tight, some parents may be tempted to cut children's allowances out of the family budget. If restaurant meals, vacations and paperbacks must go, can ice cream, comic books and CDs be justified? Yes, say the experts, as long as it's financially possible, each child should be given a share of the family's income and the freedom to decide how some of it should be spent.

By making small purchases, saving up for something more expensive and, once in a while, spending money on a disappointing item, the child learns to live within a budget. The only way a child will learn to manage money is to have some money of his/her own and the freedom to decide how to use it.

Children can begin receiving a regular allowance at age six or seven, when the child understands the concept of trading money for things, and understands the connection between receiving money and being able to choose to spend, save or give it away. This does not mean they will value their allowance greatly or understand all the possibilities of use. Young children may well be careless with money, so the beginning allowance should not be a significant amount of money. However, the allowance should be large enough that parents can feel okay about saying "no" if the allowance disappears too soon and the child asks for more.

An allowance should be based on the child's needs and should be adjusted to meet rising prices as well as increasing expenses. Fifty cents no longer buys a comic book and two double-dip ice cream cones. Today a dollar isn't a fortune, even to a 6-year-old, and while a bus fare increase of $.25 may not seem outrageous to an adult, it could be enough to wipe out a school-age child's weekly spending money.

An allowance helps children begin to realize that money is limited and choices must be made on how it is spent. Adults sabotage this understanding if they are always ready to "bail out" the child who has spent his or her allowance but wants to buy something else before the next allowance is due.

The allowance should come with ground rules, and those rules should be clearly understood by the child:

• Decide how the allowance is to be used. What expenses are to be paid out of the allowance and what expenses will the parents pay separately? This will change as the child ages. Very young children may receive an allowance for after school treats and occasional inexpensive toys. Older children may receive allowances large enough to cover clothing and fees for sports or other activities as well as money for social activities.
• If part of the allowance is to be donated to a charity or church or set aside in a savings account, specify the amount and see that this rule is followed.
• Set limits on spending. Are there things you don't want done with this money? It is perfectly all right for parents to impose their values onto the allowance rules and to forbid children to buy certain things, such as guns, products that are harmful to the environment, or other products the parents do not wish to support. This will work with younger children, as you help them set the values you think are important. As children mature and learn to make their own decisions, there will come a time when those limits may be lifted so your child can exercise his or her own responsible choice and be bound by the consequences of the choice. This becomes a great opportunity for deeper discussion within the family on values. Be selective about the limitations you put on the allowance. Remember, the value of an allowance is for kids to learn to control money to achieve recognized wants and needs.

Whether or not the allowance should be given in exchange for tasks performed is up to the family and the values being taught. If you are teaching them the relationship between work and money, no work and no money, then the job should be tied to the allowance. If you want them to understand that as part of the family they have a responsibility to contribute to the tasks of that family regardless of monetary payment, then you do not want to tie the allowance to the task.

A middle ground is to require each member of the family to perform a share of the tasks such as clearing the table or doing dishes, but to give extra money for additional work performed. This teaches both concepts, no work‑no pay, and responsibility as a team member regardless of dollars involved. If you pay the child for such work, however, it should be clearly outside the range of normal household chores and should meet reasonable standards of quality.
Parents should avoid using an allowance to reward or punish. This mixes love with money and may encourage the child to think that money can buy affection or make up for an injury. The goal is to teach children appropriate values regarding money and skills for wise money management.

When financial problems force cut backs in the family's discretionary spending, the child should be included in discussions about the types of change that will be made and whether or not his or her allowance will be affected. A child needs to understand that differences in wealth exist among families, that every desire cannot be satisfied by the available resources and these lessons are best learned in a real-life situation.

No matter how an allowance system is structured--whatever the amount, the "pay" periods, the rules about borrowing, saving and outside work--parents should remember that the money, or some part of it, is the child's own to spend as he or she likes. Parents who constantly question and criticize expenditures are not helping their child. Poor choices, after all, are part of the learning process.

Source: Lois Wright Morton, Department of Consumer Economics and Housing, New York State College of Human Ecology, Cornell University. Parent Pages was developed by Cornell Cooperative Extension of Suffolk County. HD 10

Last updated January 30, 2015