Pay Day: Allowance!

Let’s discuss the Who, When, What, How Much and Why of your allowance program:

Who
• Once your child shows interest in money you can start (can be as young as 3 or 4)
• Most children are ready by 5 or 6
• It’s never too late to start giving allowance, start today!

When
• Pay Weekly – be consistent, don’t forget
• For Teens: Pay Bi-Monthly so they can get ready for the adult world
• Pay on a day that you can remember to pay

What
• Pay in cash – there is nothing like seeing and counting cold hard cash (For teens, we will discuss other options but start with cash)
• Use small bills and coins
• Have your child pick out 3 containers (wallet, 2 piggy banks with labels):
 Spending (immediate needs and wants)
 Saving or invested (big ticket item or long-term goals)
 Sharing (charitable giving)
• Let child set goals (with your guidance - we will discuss in more detail in later posts)
 Big ticket items
 Long Term goals
 Charitable organizations

How Much
• Determine how much money you already give them and what you spend on them
• Make a list of what they will be expected to pay for with their allowance (spending, saving & sharing should all be accounted for)
• Consider an “Age” formula: $ per each year of their age
• Consider “what is the going rate – what do their friends get?”
• Consider what you can afford to pay as allowance

Remember the Why
• Having a regular “income” of their own is the only way kids and teens can learn to manage money
• They need to be able to make mistakes when cost is minimal
• By knowing the limit of available funds, it will force your kids to:
 Think about how much things cost
 Make spending choices between many things they want
• They will have more appreciation for things they buy when they use their own money

GOAL: Give your child the opportunity to learn how to manage money through their own success and failures with your guidance.