3 Tips for Setting an Allowance for Kids that Works

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Everything you’ve tried never seems to work… Trying to tie it to more chores as they get older, but then they do some of the chores, and they wouldn’t do others. Every week is a struggle.

This struggle is real. And one shared by many. Here are a few simple tips for setting up an allowance you can implement immediately.

tips for setting allowance table
Use three jars (or envelopes or conch shells)

Conch shells? The Money Mammals think using three jars is the best approach, but whatever you do – yes, conch shells would work – give your child “buckets” so they get used to making money choices.

You and your child have set up your jars, labeling them Share, Save and Spend Smart. Now what?

We all worry our child may run amok, spending money like a Kardashian. Don’t let your worries run into that spendthrift syndrome, where you dole out a pittance because you don’t trust them with money. Remember the consequence of any empty jar may be a more powerful lesson than anything you say to them. The dilemma here is in order to establish trust, you have to trust them with a meaningful allowance. Recognize spendthrift syndrome before it’s too late, or you may hear something like… “Yeah, Dad, thanks for my 75-cent allowance. I’ll be able to get that Razor scooter I want in a few decades. Awesome.”

This statement isn’t that far from reality. Remember, the purpose of an allowance is to teach your child to be responsible with money. Be careful not to under-power them.

You have leeway to construct your own system – to distribute an amount that works for your family. You need to fully empower your child with meaningful amounts. Otherwise, your program will be in jeopardy of failing before it starts.

A good starting point for allowance is one dollar per the child’s age per week. So, a five-year-old would receive five bucks per week. Pretty simple – nine bucks per week for your nine-year-old.

Of course, if your financial situation doesn’t allow you to use this guideline, then adjusting your allowance rate is sensible. Just don’t err on the side of doing nothing.

Be explicit about your purpose

The reason for clear jars or conch shells is because they emphasize the transparency we want to bring to our discussions without kids. We also want to explain to them they’re receiving an allowance to learn to become responsible with money and to discover the three money-smart skills of distinguishing between needs and wants, making smart money choices, and saving for goals.

Some individuals argue an allowance not tied to chores is akin to an entitlement. That belief assumes accountability only comes from working for money. Of course, just giving your child some money and calling it an allowance is an entitlement. Granting them a purposeful allowance with a plan isn’t a handout.

Set a SMART goal as soon as possible

Goals are powerful life lessons for our child. The ability to save for a goal isn’t only a core money-smart skill, but also an essential life skill for your child to learn.

From a practical standpoint, keep your goal-setting simple. A five-year-old’s attention span is short. A child’s ability to visualize exists, but it’s limited. Find a simple goal, like a scooter, that might take four to eight weeks of saving. Delaying gratification is okay, but not by so much your child’s eyes glaze over.

Goals should be SMART: Specific, Measurable, Achievable, Relevant and Time-based.

Help your child decide on something they want that’s reasonably priced (specific and relevant). Identify how much your little saver intends to contribute each week (time-based) and how many weeks saving for the goal will take (measurable and achievable).

And a bonus tip…

Start early! Here’s one reason why:

You may be familiar with the term “emergent literacy”, the concept that children are in the process of learning to read and write by absorbing knowledge when they’re in early childhood, babies even. This notion is the reason many of us read to our children before they can walk.

Young children assimilate the ever-present messages about consumption and can readily absorb communications that counter the American creed to consume more. By not introducing the concepts and language of money – sharing, saving and spending smart – to our children at a young age, we do as much of a disservice to them as if we didn’t expose them early to books and writing.

Good luck on your money-smart journey.