Children and Allowances

As children age and become more independent, the issue of allowance is sure to come up. Giving an allowance can be a great way for parents to teach their kids important life lessons about the value of work and how to manage their money. But there can be some hidden pitfalls to consider.

To spend or to save?

An allowance can teach children about financial responsibility through choices. When they have to make decisions about whether to save or to spend, and decide if an item is truly worth it, they begin to view money differently. They’ll learn that finances are always limited and they have to prioritize.

Chores are important

The downside is that the child may start to view the allowance as their right, especially when it’s not tied to doing chores around the house or to good performance in school. Even if parents put conditions on their child’s allowance, things may still go wrong. The child may simply go through the motions to get a paycheck, rather than learning to appreciate how their efforts help the family. 

In addition, a child may not appreciate the value of things that don’t have a dollar sign attached to them. And, as they grow older, some children may even learn how to ‘negotiate’ a better deal. 

Even if you don’t feel comfortable giving your child an allowance, be sure to discuss earning and saving money, budgeting and other topics. With the right guidance, your child will learn important financial habits.