Earning an Allowance Can Be a Great Financial Less

Colleen Kelley - I have been a freelance writer since 2000. I write, edit and publish newsletters for four non profit organizations and several ...

Cool Allowance Cash - imelanchen

Healthy financial planning absolutely should begin at a young age. It is not against the law to require a kid to work for an allowance. It teaches the youngsters there is no such thing as a free lunch and how to plan saving and spending. It is great thing for parents to provide their kids with every opportunity possible, but it’s not always a good idea to just give them everything they want.

The Allowance System

When giving children an allowance, there should be an outline of what the child has to do to earn that allowance and what the allowance has to cover. The allowance may be for whatever the kids want to spend it on, but it might also include some necessities like some school supplies or new socks once in a while. Post a copy of the list where all concerned can see it.

Perhaps a communication board in the “Family Media and Communication Center” is the place to post such information, or maybe each family member has a notebook with all the rules of the family, including allowances. It is important all concerned understand the allowance system. The number one rule of the allowance system is if the required work is not completed, the allowance is not given.

Consider additional compensation if additional work is assigned. That is not to say the kids should be paid for every little thing done around the house. There should be tasks assigned to each kid that must be completed without being compensated. It is called learning responsibility and then taking your share of the responsibility and helping the family in the spirit of cooperation.

The amount of the allowance given should be based on the family finances, the age and maturity of the kids and the amount of work expected to be performed.

Kids are Never too Young to Budget

Help the kids make a budget of their allowance expenses. List out everything the allowance has to cover, including a miscellaneous category and savings. Seeing something in print has more of an impact than just something being discussed. Encourage the youngsters to keep track of spending and once in a while go over the spending with them. Point out areas where they may be able to save money or where spending might be considered frivolous.

If the children run out of money before their next allowance is paid, do not be too quick to fill in the gap. It might take running out of funds a time or two before the importance of sticking to a budget begins to sink in. It may seem outlandish for a kid in elementary school or middle school to be budgeting an allowance, but how else are they going to learn money management skills?

The Excel spread sheet can be put off until high school, but discussing budgeting money is a topic for any age. Good habits developed at a young age will last a lifetime and the kids will be better off in the long run. Thinking about money at a young age does not have to be an obsession, but it should be as ingrained as the solution to their favorite video game.

Children are Never too Young to Start Saving

It is always good for everyone to have something set aside for a rainy day and that includes kids. Take the young ones to the bank and open a savings account, if one already has not been started. Discuss the importance of savings and establish a savings goal. Designate a portion of their allowance for savings, even if it's just a dollar.

Set the savings aside in a container until it is time to go to the bank and deposit the funds. Allow the kids to buy something they want with a portion of their banked savings perhaps once a year. Establish how much they can take out of their account either by dollar amount or percentage. Make sure what they spend their money on is mutually agreeable.

This exercise will reinforce the idea they have to work for what they want. By the time the children reach high school, they should have a good handle on fiscal responsibility. When they get that first part time job, they will already know earning money is not an easy task and will have some respect for their earnings.

Encourage continued savings and make sure they put something from each paycheck into a savings account. “Pay yourself first” and “every nickel counts” are words to live by. Learning how to earn and spend money is a very valuable lesson. Those that learn that at a young age will most likely carry those lessons through life and grow up to be financially responsible adults.