In some homes, it is customary to give children set allowance. In others, it’s not. Certainly our children aren’t contributing to the family income, so is it worthwhile to give them allowance at all?
Giving children allowance can actually prove very educational- it helps our children learn to deal successfully with financial challenges.
Giving allowance creates an excellent opportunity to teach our children about family values when it comes to spending money- it also lets us check with our children whether the money is a means or a goal. Is the purpose for wasteful spending, or to save for something big? Does having money available encourage wasting it? Allowance gives a sense of independence in managing money, but true independence always comes with responsibility. The responsibility applies to the things that our children to buy, as well as the way they manage their money in general. Allowance is a tool that enables children to experience a certain level of freedom, independence, and decision making. It is also an opportunity for parents to practice some freedom from control. Everything is managed within the limits that we will define for the use of pocket money- when the children are smaller, the amount is smaller and as they grow older, the economic challenge becomes greater.
Children who receive allowance can practice budget management, postponing gratification, future planning, prioritizing, and parents can act as role models for responsible economic management.
How to give allowance, and how much to give?
Defining the boundaries of allowance depends on age. As children get bigger, the amount increases too. When allowance is given, the amount and frequency should always be defined together with the children. Children in kindergarten can be given a few shekel per week, and as the child grows it’s possible to increase the amount. High school students can manage a large part of expenses themselves, so the scope can be expanded. Gradual growth in the size and use of the money will enable the child to learn to manage their allowance, and money as an adult.
What to do and what not to do: Define what you expect your children do with the money- what they can buy and what they can’t. Each family has different values and priorities when it comes to economic conduct, and it’s important to define expectations with the children to prevent common arguments of “this is my money and I can buy what I want.”
Needs versus want: Allowance is a great way to learn about prioritizing when it comes to expenses. There are things we need, and things we want to buy. The definition of ‘need’ and want’ at a young age will help the child as an adult distinguish and prioritize his expenses. You can define the necessary uses such as purchasing a friend’s birthday gift and the ‘want’ as shopping, sweets, games, entertainment, and more. Encourage your child to think about the way he chooses to spend his money. Check with him to see if he tends to waste it on nonsense or if he thinks about what he wants before purchasing.
The child can be taught to allocate half of the pocket money to savings, 40% to buy what they need or want and 10% to donate for the purpose he chooses.
Wise Consumerism: Allowance is an opportunity to provide tools for making informed purchases: comparing prices, buying generically instead of brands, looking for sales, and understanding the affects of advertisements on purchasing decisions.
Money Management: Allowance is a budget that must be managed- the use of the money should be planned according to how much there is, how much is spent, and how much is left- according to the age of the child.
Earn more: Getting an allowance is nice, and putting in the effort to earn a larger amount is nicer. Are you interested in encouraging your child to save? Encourage him to work and double the amount he will get that can be used to fulfill a meaningful goal.
What do we do when there are problems?
The weekly or monthly allowance has run out and your child needs more money. The guiding principle behind an allowance is that it’s a fixed amount of money and once spent, the following allowance can be received the next month, or at the fixed time. Giving children a set amount will teach them to live with what they have.
The child spent his money on something and he’s sorry about that. You gave your child his allowance and he ran to buy the first game that caught his eye. Explain to him that the money he received can be used for what he wants, but encourage him to check out options, think about what he wants, and make a list: how much money should be invested in shopping now and how much should you save for a larger purchase, which game will give a good value for the money, etc.
The child is trying to save for something bigger and fails because he spent all of his pocket money already. Teach the child to first allocate the money he plans to save and separate it from the rest. This way, putting aside an amount, he will always have enough money to save.
The child wants to buy something and you decided to help him by giving the necessary amount. Teach him about loans. Explain that it should be returned and insist on a return of the amount at the time you agree.
Do you want to encourage children to save? Increase the allowance in the weeks that they do manage to save.
What not to do: Do not use allowance money as a punishment. The child saved, and that’s his money. Taking money that was already given conveys a problematic message especially for the positive management habits that they can acquire, which serves as the purpose of the allowance.
Have you set principles for using the money? Don’t deviate from the principles you have defined. If you suddenly don’t let them buy something with their money, the children will question the values and principles of managing money.
Understand the difference between children: Although your children grow up in one home, do not be surprised that they behave different. Just as adults have different approaches to money, so do children. Some children will look for every opportunity to work and save money and some will be less interested in planning and will spend on a whim.
You do not always have money either. Were we not careful to provide the allowance on time? The children will soon learn to remind us that we forgot to give them their allowance and they know very well how to keep reminding us of our debt to them. Apart from the inconvenience this creates, especially in a month that is difficult for us financially, there is positivity: our children learn to stand up for what they deserve- an ability that will help them a lot in life.