Tuesday, October 4, 2011

Allowance – When and How Much? Positive Parenting Solutions Article

If you are wondering about alowances, this is a great article from Positive Parenting Solutions

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Parents always ask about allowance – when to start it and how much to give.


First – when to start…
An allowance can begin as soon as your kids start asking for things at the store -– usually around the age of three or four. It should be used for the “I wants” -– the non-essential items that fall outside of your responsibility such as toys, candy, entertainment, etc. When your child is begging for the latest, greatest Barbie, simply say, “Do you have enough of your allowance saved or would you like to put that on your wish list?”

Even if your daughter doesn’t understand that a new Barbie costs $20, you can draw 20 rectangles on a piece of paper and encourage her to put an “X” on each rectangle as she saves another dollar.

Older kids can be expected to use allowance for their cell phone bill, downloaded music, and even clothing.

How much?
 Some parents use the $1/year rule.  However, a more effective strategy in determining how much cold, hard cash to give for allowance is to ask yourself three questions…

1. What do I expect him to buy with that allowance? Cell phone, savings, charitable contributions, lunch money, spending money, activity money, etc. 
2. How much will she reasonably need to do that?  Determine how much allowance to give based on what expenses you expect them to cover and how much they’ll need to do that.  Keep in mind any money they receive from grandparents, etc. during the year. In the teenage years, consider giving a lump sum (not too much) for the purpose of buying clothes. Your child can make the decision on how that money is spent. She can buy one pair of designer shoes or three pairs of fashionable, yet reasonably priced shoes. Once the money runs out, that’s it. Do not give in and “float a loan” until the next allowance date.
3. How much will make him just a bit uncomfortable? We don’t want kids to be too comfortable or they’ll lack incentive to work harder. Again, in the teenage years, less money is better than more. A child who is flush with cash has little incentive to find a job or tap into his entrepreneurial spirit. 

Giving allowance to kids of all ages and empowering them to be responsible for many of their own expenses will teach valuable lessons in budgeting, saving, making tough choices with limited resources and the consequences of making poor financial decisions.

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