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.