If you've got kids, chances are you've thought about and maybe even discussed the pros and cons of giving your children an allowance. Here, we will look at both sides of the debate, discuss common allowance structures, and offer practical tips, for those looking to give an allowance.
The Pros of Giving a Regular Allowance
When looking into the allowance debate, those in favour of giving a regular allowance often fall into two separate camps; those who believe that an allowance should be given regularly in exchange for completed chores - and - those who believe a regular allowance should not be linked to chores.
The major benefit of linking an allowance to chores, is that children learn from a young age that hard work pays off. Especially if you offer a system where kids can earn a little extra money, by completing extra chores. Additionally, kids learn how to plan ahead for their financial needs. For example, if your child knows that she has three birthday parties this month, she can figure out in advance, what extra chores she would like to do, in order to have enough money to buy gifts.
The downside to this approach, is that some kids decide they don't want the money. Which means the chores go unfinished, and the learning opportunity is missed. Additionally, it sends an inadvertent message to children that participating in the household, should only be done in exchange for rewards - which undermines the importance of contributing to the family.
For this reason, many parents decide to give a weekly allowance that is not linked to chores. The benefit to this approach is that kids learn to be careful with their money, as they know this is all they will have for the week. Additionally, parents are better able to budget their money, when they know how much they will be spending on allowance each week.
The downside to this approach, is that kids inadvertently learn that they are not in control of the amount of money they make. And in some cases, teenagers who have had this model in place for a significant amount of time - tend to develop a sense of entitlement when it comes to money, as money has always been given to them, unconditionally.
The Cons of Giving a Regular Allowance
There are many parents who oppose implementing any allowance structure at all. In this approach, parents provide all of the necessities for their kids, and typically agree to provide a set number of luxury items each month.
The benefit to this approach is that kids learn that contributing to a team, is its own reward. And that taking care of the house and the people in it, has its own inherent value. Additionally, parents are forced to talk more frequently with their children about money - as they are providing for all of the child's needs and wants.
The downside to this approach, is that kids miss out on the opportunity to learn and practice money management skills.
So, what's a parent to do?
It can be challenging to navigate the world of allowances. So I recommend sitting down with your family to discuss each of the options and decide which one works best for you and your crew.
Here are some of the key points to keep in mind when having these conversations:
1. Think about your own household budget when coming up with an allowance plan - how much can you realistically and comfortably afford to give your children? Does your household budget allow for flexibility? Or do you need to know the exact amount each month?
2. Make sure to talk with your partner about the values that you both want to instill in your children. I always recommend that parents separately write down their top five values and then compare lists - try to find a solution that fits with everyone's values.
3. How will your plan teach financial literacy to your child? Whether your plan involves you and your child talking regularly about money management - or allows your child to practice these skills independently, the important part is that your children become familiar and comfortable with financial literacy.