Most parents can agree that we want to set our children up with good money sense. One way that can be done is through giving regular allowance. Allowance gives kids experience with real money, in exchange for the completion of age-appropriate tasks. The age will be a determining factor of the amount of allowance and scope or responsibilities.

Some parents may feel like they do not have to pay allowances because they generously hand out money when their kids need it. However, kids that get money as needed may have less incentive to save than children who received the money via an allowance, even if the total amount received is the same. Consider the following guidelines for allowance:

• Do not grant too much independence by telling them they can spend their allowance on whatever they want. Encourage them to save at least some of their allowance and advise them to spend the rest wisely.
• Do not take away allowance as punishment. It is an educational tool, not a disciplinary one.
• Carefully consider increase requests. Discuss with your child why he or she is making such a request. You can spare yourself weekly negotiations by telling your child(ren) that they can only ask for an increase twice a year.
• Do not reveal too much about your own finances in the process. Simply explain that your own budget is limited and there is no extra money for higher allowance rates.
• Do not be too generous. Too much money in a child’s hands can breed careless spending.

Be sure to open a savings account for your child so they can see their money accumulating in a secure location. This can also help introduce them to the concept of interest.

Educatioonal use only.