MONEY SMART KIDS Foolproof Allowance System by Janet Bodnar
Of all the subjects I write about, one of the most consistently controversial is allowances. I firmly believe there's no better way to give children hands-on experience with managing money -- and avoid financial run-ins between parents and kids -- than to give an allowance. Here's my guide to the foolproof system I used successfully with my own three kids:
Start when your children are age 6 or 7. Preschoolers are generally too young to understand the relative value of money (they'll nearly always choose a nickel over a dime because it's bigger). But by the time kids are in first or second grade, they know that four quarters equal $1, and they have an idea of what $1 will buy.
Start with a weekly base allowance equal to half a child's age. Adjust that up or down based on your preference and what you expect your child to pay for. I've heard it recommended that kids should get a weekly allowance equal to their age, but I find parents think that's too much for younger kids. Parents are more comfortable with the half-age figure.
Don't tie the base allowance to chores. That may sound like heresy, but after years of talking and listening to parents, I've learned that many parents -- myself included -- object to paying kids for jobs they should be doing anyway. If they made the mess, they should clean it up gratis.
Also, some kids simply aren't motivated by money. If they don't need cash, the chores don't get done, and the allowance system falls apart. Many parents have trouble keeping track of whether their kids have actually done the work they're supposed to do.
Does that mean you should just hand over money to your kids? Absolutely not. In return for their allowance, kids should get what I call financial chores.
A 6-year-old could be responsible for buying small things such as collectibles. Middle-school-age kids should be responsible for entertainment expenses and excursions to the mall with their friends. Don't ever hand your 13-year-old $20 on his way out the door. By high school, teens should be managing an allowance for gasoline and clothes.
Beyond the base allowance, kids can earn additional money on a chore-by-chore basis by getting paid for individual jobs you define as "extra" -- vacuuming, yard work, washing the car. That teaches them the value of work for pay, and it's easier for you to keep track of.
GETTING STARTED
