Most of the time, when a person has come to our agency, it is because their budget is not working so well right now. If they are parents of children living at home, we may often shock and dismay them with a topic for discussion: Giving their children an allowance.
Part of the reason we might get a surprised look when this topic is brought up may be in part due to the fact that they have been telling me for the past 10 minutes about how difficult it is to make ends meet – yet I am suggesting they add to the expenses??
Here are the reasons you may save money by giving an allowance:
- Your kids may be a spending leak. Are you caving on fast food items and small purchases when you are out with your children? Are you guilty (as am I) of sometimes bribing your children to good behavior with the promise of a small treat? These spending decisions are made under pressure (some might use the word “duress”), and can add up. If you think this might be you, track your spending for a month to see how these spending leaks may be impacting your budget overall. Giving your kids an allowance gives them the opportunity to bring their own spending money, and for you to remind them that is what it is for!
- Your kids need to start their money education. This starts with being able to use their own money. Kids should separate their modest allowance into three categories: Spend, Save, Give. Some experts suggest adding a fourth category: Invest. Allow them to choose how they break up this money and acknowledge with specific verbal praise when they make a decision you are proud of “I like the way you gave that money to the tornado recovery fund.” As an extra incentive, you may consider a monthly matching program for amounts saved. Click here to find out what your kids can start learning based on their age. How does this save you money? A money savvy teen or young adult is WAY less expensive to parent than one who hasn’t had a chance to practice these skills. It may be a long game, but the savings are real!
How do I start?
- Our friends at Oklahoma Money Matters can get you started with this article. We think regular chores should be mandatory. In fact, CCCSOK.org Senior Credit Counselor Tressa Brooker enacts a fee for hire structure at her home for undone chores. She states, “If I have to do the chores they are required to do, then they have to pay me.”
- Chores that are “above and beyond” can be a way – at your discretion – for your child to make additional money, but they don’t get paid for their regular chores.
- Allowance should not be conditional on behavior. In Tressa’s example, her children receive their allowance, but pay the price for hiring mom to do their chores. Use this allowance calculator.
- Use jars or piggy banks to separate the money into sections. We think this Moonjar is pretty nifty.
Remember, the best way to raise financially savvy younglings is to practice good financial practices at home. If you would like a free financial analysis and action plan to help your family get on the right path, contact us at CCCSOK.org.
