Make Allowances Pay Off

Saving is fun if you think of your goalThere are two sides to the coin when it comes to allowances. Some parents are all for it, while others argue that they’re not inclined to pay their kids to live rent free, with three square meals a day, a healthcare plan, a personal chauffeur, live in cook, nursemaid, and housekeeper thrown in, too. To each his own, and a good argument can be made either way.

But for those who decide to go ahead and give that allowance, I’ve got a few ideas to chew on that might give you a little more bang for the buck in the parenting department. You may find that giving an allowance to your child can give YOU an opportunity to teach him about values, investing, budgeting, and thinking of others, all at the same time.

So here’s the deal:

1. First of all, wait until he is at least old enough to count and to understand the basics of what money is and what it’s for. Kids often start getting interested in money around age four. Play with the pretend money and cash register and start explaining about the different values of coins and bills. Explain that in the world, people get money for work that they do and use it to buy their food, clothes, rent etc.

2. When you go to the grocery store, talk about prices and let him scan the items once in a while at the do-it-yourself checkout counter and watch you pay for them. Let him see that you use money for all sorts of things, like buying gasoline or tickets for a movie.

3. Before you start giving an allowance, decide what it’s for and be sure to explain it carefully to him. If you decide to attach chores to the allowance, start with one or two small ones. Pay the allowance weekly, on the same day, so he sees the connection between his work and his allowance. Have a routine in place where you and he can check off the completed chores on a chart each day. This helps him to be accountable and also helps him remember.

4. Consider setting up a system in which the earned allowance is divided into parts. One small part goes into savings (which you keep for him till he has enough to make a deposit), one into his personal piggy bank, and one into a charity or organization of his choice. This is a great way to get him interested in saving for the future, helping others, and having an impact in the world.

5. Set up a savings account for him at the bank and when you’re ready, take him down and let him see you make the deposit. Kids love to watch that nest egg grow and it really gives them incentive to keep it up. My youngest son’s eyes almost popped out of his head the day he figured out that the bank was paying HIM to keep his money there!

Encourage him to save up his piggy bank money for something he really wants or to use it for birthday or holiday presents for the family. Teach him to be a smart shopper by comparing prices when he wants to buy a particular thing. And let him know that just because he has that money in his piggy bank, he doesn’t have to spend it right away.

Little children are naturally empathetic. They love to help people and have very big hearts. You can help your child find a way to support a cause connected to something he cares about, like the oceans or an endangered animal or children in need. Encourage him to think about ways his money could make a difference and explore organizations around the world that are doing great things.

Who knows? Play your cards right and you may be setting the seeds for the next Warren Buffett, Bill Gates, or Vincent de Paul!

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Ellen W. Schrier, LCSW, is a family therapist and the mother of three adolescent/young adult kids.

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