Parents need to decide on matters about their children. But, one issue parents often ignored or procrastinate in deciding on their children’s allowance. Should the parent give the children pocket money (allowance)?
It’s a personal choice to give your kid an allowance. Many parents feel that every day a kid should do some chores to contribute to the family. Other families feel they should give a child an allowance because when they are younger, their daily tasks are like their job. If you are struggling to decide whether to give your child an allowance, consider the advantages and disadvantages of giving your child an allowance.
What are the benefits of providing an allowance for your children?
What Are The 6 Benefits of Giving An Allowance To Your Children?
Let’s explore 6 reasons why you should give an allowance to your children.
1. This is an opportunity to educate your kid on financial basics
Use their allowance as a tool to educate your child to be a financially-responsible person. Don’t just give the child the money. Accompany it with lessons* on budgeting and saving.
Even if your child spends all their allowances on junk food, it is okay. They will learn the consequences when their pockets are empty. This is a good time to teach your child how to manage the consequences of poor financial decisions.
2. Earning money
In order for the kids to learn the relationship between work and pay, parents may tie the allowance to chores. Children must understand that they have to work for money. Money doesn’t grow on trees. Helping your child understand the correlation between work and reward will do wonders for their future careers.
3. Learn from making mistakes
Your kid will make a lot of mistakes when handling their new-found ‘wealth’. Sounds like a drawback? Not exactly. Learning from your mistakes is a valuable teaching tool. It’s better to make mistakes while young and in a low-risk setting. Mismanagement of money by spending all at a video game arcade is better than making a blunder in the stock market as a young trader.
4. Budgeting and saving
Once parents have given the child an allowance (assuming monthly and fixed), your child can use it to buy anything he or she wants. Yes, including toys. This way, kids don’t have to ask for money anymore every time they want something. If the money dries up before the month-end, because of that expensive toy, then too bad. They got to make up for it next month on the deficit.
Or, get a loan from the parents. There are still expenses to cover for the remaining period of the month. Giving a loan to a child is a good way to teach about credit and interest.
Budgeting is a balancing act. Use that expensive toy to illustrate the principle of “needs and wants”, delay gratification and “spend within your means” to children. In times of limited funds, we need to practice restraint and frugality.
5. The relationship between working hard and being rewarded.
Using their allowance as a reward system for getting good grades in school could help your kids to gain acceptance into a good college or offered a scholarship.
Working hard is a habit. So, train your children to put in the effort on every endeavor. This habit will stay with him/her forever. Hard work pays off. The reward may be in the form of promotion, a new title, recognition, prizes, or appreciation.
6. Helping the less fortunate, if financially able.
Compassion towards the less fortunate is a good trait to instill on children. Teach your children about compassion using part of their allowance to buy food for the poor and less fortunate.
By cultivating a philanthropic mindset, kids will appreciate the greatest joy of spending money is helping the poor and not splash it out on themselves.
What Are The 6 Drawbacks of Giving An Allowance To Your Children?
Giving children an allowance can be a great teaching tool for money management. Many parents advocate giving an allowance. But, there are some downsides which parents should look out:
1. Your children may view their allowance as an entitlement.
It may turn out badly for you as a parent once you begin giving a regular allowance for your kids. When your kids receive a reward to perform some chores, as time passes, they may become slow and unwilling to help around the house for free. This perceived privilege/entitlement will move to other areas of life and may create chaos in your household.
Experts also find that kids who receive daily allowances often see it as their right. As a result, these children will be less financially literate and less motivated to work.
Point out it is not wrong to expect payment for a job done, in the working world. In a household, every member must contribute to the family. Give a real-life example of you not being paid for doing house chores. A good example is making dinner for the family during your wife absence. Your kids need to realize an allowance is a luxury and not a necessity.
2. Money can easily become the only motivation
Money might be a powerful incentive, but it’s not the only reason for doing anything. When you give money to pay your kid for housework, you risk them to clean the bathroom because they know that you will pay them for it.
Doing house works should be more about taking on responsibility and care to keep a safe and clean living area. You wouldn’t want your kids thinking the only advantage of cleaning up is getting paid. Since there’s no chance of payment after completing tasks, they would not want to do it.
3. No guarantee your children will be smart with money
If you do not tie a lesson to your action, granting your children a reward does not really help them understand about money. When you pay them back for their work every week, and they blow it, you waste your money and a chance to teach money principles.
For example, my mother liked to give money to my siblings and me when we were kids if we received excellent marks. As a kid, it felt great to make extra money, but as I didn’t know how to spend wisely, I don’t even remember what I wasted that money on. The experience didn’t really help me learn anything smarter regarding money management. This is something I’ve been forced to learn as a grown-up.
Do your kids a favour and follow up with age-appropriate money lessons.
4. A chore is a responsibility and not a work-for-money task
Have your parents ever paid you to help cook dinner or wash clothes? If your children received money to tidy up their own room or to help with housework, is keeping a clean college dorm room also got paid?
Parents must teach their children about the need to do housework. It’s the responsibility of every family member. The whole family must help with household chores. Each family member is allocated with some housework. The question of money reward should not arise at all. The parents will impose a penalty for incomplete chores. If some family members do not understand or violate the rule of teamwork, other family members must take up the shortfall.
5. Parents have no control over allowance usage.
Some mothers or fathers wish to have better supervision over what their children are purchasing using their allowance money. Parents rather permit each acquisition and pay for it themselves rather than hand over that authority to their kids.
6. Parents emphasis too much on the money aspect of allowance.
When the parents place too many requirements before earning an allowance (e.g., doing chores, getting a string of A’s in exams, no wrongdoing, etc.), the child may think in terms of “if I do things for other people, then they must compensate me”.
If receiving money is a child only motivation, rather than by being obligated to the family, then they may not cultivate an understanding of the value and importance of everything that doesn’t have a monetary reward.
Irrespective of what you want to do, communicate clearly your rules to your kids. And, enforce whatever guidelines or instructions you created. Take this opportunity to teach your kids wise money lessons.
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Are you ready to give your child an allowance? Are there any other benefits or drawbacks? Please do feedback.