As parents, we want our kids to have a healthy relationship with money and be equipped with the right tools when they leave the nest to become financially independent. Talking about money is an important first step, but to build skills, children need to have the opportunity to have, save, and spend money of their own. For many little ones, earning an allowance is their first opportunity to manage money.
Some parents bristle at the idea of just handing their sons and daughters money on a weekly basis, but there’s more than one way to do allowances. Check out the three approaches outlined below and try one on for size in your family!
The No-Strings-Attached Allowance
This is what many people think of when you use the word allowance. In this version, you give your kids a set amount of money at regular intervals, typically weekly, but use whatever time period works for you. Maybe you’ll time their allowance to sync up with your own paydays. Maybe a monthly allowance will be easier because you don’t have to think about it as often.
Whatever the frequency, this allowance isn’t tied to chores or work. It’s a set income they get just because. You may consider “garnishing their wages” as a consequence for bad behavior, but there isn’t anything they have to do to earn it.
The Conditional Allowance
The conditional allowance is a set amount of money given at set intervals, but the kids need to complete their regular chores in order to earn it. In this version, your kids have clear expectations of what chores need to be done daily, weekly, etc. to stay in good standing. As long as everything on the to-do list is crossed off—or the sticker chart is full for younger ones—the allowance is paid out.
And if the chores don’t all get done? Make the consequences clear to your children before they’re needed so they know what to expect. If a few tasks are missed, you might reduce the allowance proportionally. Another option is to go all-or-nothing; list not finished = no allowance earned. Will you offer a grace period to finish the work and still earn the full amount? Think it through and set all the rules, then hold firm when they’re tested.
The Earn-It Allowance
You might not think of this option as an allowance at all. There’s no set payout. Instead, there are jobs-for-hire regularly available that your offspring can take on to earn whatever a particular task is worth. It’s important with this option to make sure there are enough opportunities for your kids to earn, that the jobs are age-appropriate, and, if you have more than one child, that no one is claiming all the tasks before siblings have a chance to chime in.
A big advantage of the earn-it allowance is how well it transitions teens and tweens to getting first jobs as they get older. They’ll replace the little jobs they do at home with that first babysitting gig. It’s also nice to create a honey-do wish list and watch those tasks get done around the house at below-minimum-wage prices. On the flip side, you may find it stressful to think of enough age-appropriate tasks to fill the job demand, particularly if your family falls more into the toddler and elementary age-range.
Do What Works for You
There’s no single right way to do allowances. The important thing is to create opportunities for kids to manage money and learn good financial habits. Do what works for your family! You could mix all three options together or come up with something totally new.
When you’re ready to get started, make sure the whole family has a safe place to put money aside for the oh-so-important savings category. We have youth accounts created to perfectly fit our littlest Members. Open your saver’s first account at GOLD in just a few clicks!
About Cheryl Bartholomew
Cheryl is the President & CEO at GOLD since 2009 and has over 36 years of banking experience. She ensures the happiness of all Members through positive experiences that exceed their expectations, regardless of whether it's a simple phone call, electronic transaction, or face-to-face interaction. She strives to provide a positive work environment for her employees so they continue to go above and beyond for Members. She works closely with Member Volunteers (Board of Directors and Supervisory Committee) and makes sure they feel appreciated for their contributions in setting up our Members for success. Cheryl believes that all Members can be empowered to take control of their financial well-being, and she's proud to say that we at GOLD are confident in helping them do that.
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