WNY Family Magazine September 2018 - Page 14

Why You Should Give Your Kids An Allowance Allowances: Yes or No? Parents have always had questions about whether or not to give their child an allow- ance. At what age? How much? Should an allowance be tied to chores or shouldn’t a child be expected to do chores, without payment, as a member of the family? What about the save, spend, and give approach to $ the money they’re given? Lastly, how does an allowance serve as a way to educate a $ child about financial choices in their future? We thought about running the three ar- ticles found here as a series in three con- secutive issues of WNY Family, but after a lot of thought, felt that including them in one “package” was the best way to pres- ent a comprehensive look at the subject and $ provide more than a few “pennies for your thoughts” on the subject of kids and allow- M ost parents give their kids a regular allow- ance; some a few dollars a week, others substantially more. But is that advisable and, if it is, at what age should you start giving it to them and how much should you give? Experts agree that an allowance can teach kids important money manage- ment skills, like how to save for things they want, how to budget their money, and how to choose between competing spending goals. Brad Munson, a person- al finance expert, says an allowance “is a great way to teach kids about the real value of money, how to be organized and responsible, and how to plan for the future.” Financial counselor Ray Mar- tin, who is the author of several books on money management, adds that an al- lowance is a great opportunity for kids to experiment with money and to learn from their mistakes. “It’s a way for them to learn big lessons with small amounts of money at an early age.” It’s important that you talk to your kids about the value of money, and it’s best to do so in the context of an actual 14 WNY Family September 2018 — by Tanni Haas ances! allowance. Marty Allenbaugh, a certi- fied financial planner, says that talking to your kids about money without giv- ing them an allowance is like trying to teach them how to play the piano with- out ever letting them sit at the keys. are ready to benefit from an allowance once they have reached certain develop- mental milestones, like 1) understand- ing that money can be exchanged for things they want, and 2) they can confi- dently add and subtract. Research shows that giving kids a regular allowance while discussing with them the importance of money makes them more financially responsible as adults. They become, as Evonne Lack, a personal finance expert, succinctly puts it, “less likely to arrive on your doorstep years from now with a duffel bag full of dirty laundry and a mountain of credit card debt.” And, here, kids differ widely. While some kids reach these milestones at age 4 or 5, others get there by age 8 or 9. “So if your child tends to shrug at money, losing it before it can find its way to his dusty piggy bank, hold off until you see signs that he enjoys saving it or thinking about how he might use it,” says Mrs. Lack. When To Start If an allowance is such a great tool for teaching kids money management, at what age should you start giving them one? Many parents start at age 8, but ex- perts agree, as Mr. Martin puts it, that it’s the kid’s “aptitude not the age that really matters.” So how do you know if your kids are ready to receive and learn from an allowance? Research shows that they How Much Allowance? Finally, but not least importantly, what amount should you give your kids? Experts agree that, as a rule of thumb, you should give them $1 per year of age on a weekly basis: for example, a six-year-old would receive $6 a week and a ten-year-old $10 a week. The advantage of this approach is that kids get an automatic raise every birthday, eliminating the question of when their allowances will be increased. If you are