My husband and I started giving our children, ages 8 and 10, a monthly allowance a couple of years ago. Now that I see how valuable having their own money is, how helpful it is in teaching them important lessons and concepts in personal finance, I regret not starting sooner! Here are my top reasons for giving my children a monthly allowance.
Teach the Concept of Budgeting
An allowance is one of the best tools we have for teaching our kids the concept of budgeting. It’s not the only tool, of course. You can go into a store and give them a budget for that store, and it will work too. I often do that. But a regular, monthly allowance works nicely because it consistently reinforces the idea that they have a budget, and they need to find a way to fit their monthly purchases into that budget, because if they spend it all on the first day of the month, they would need to wait an entire month until they have money again.
Avoid Unnecessary Purchases
This is one of my favorite reasons for giving an allowance. Now that they get an allowance, we still buy their necessities (food of course, basic clothing and shoes, school supplies and books) but they need to pay for the extras. What are extras? Extras include Nintendo games, a Webkinz membership, fashion accessories, candy, and any other purchase which is not a necessity.
The beauty of the allowance system is, that when it comes out of their own pockets, the children are much more selective about their purchases. When it’s our money, they want to buy everything in sight, but when it comes out of their own allowance, they think twice before buying an item.
Teach Them To Save Towards a Bigger Goal
My kids receive $10 per month each, in addition to birthday and holiday gifts. They may also earn extra money when they do extra chores beyond their daily chores. Since we buy the basics, this gives them a nice amount of cash, especially if they manage to save. In fact, one of the best things about an allowance is that it enables kids to see very clearly that if they delay gratification for a while, those $10 will grow to $30, and combined with cash gifts they could find themselves being able to afford VERY nice items – whether clothing, accessories for their room or computer games.
Teach Them Responsibility
Now that the children have their own money, they learn responsible behavior and taking responsibility for one’s actions. For example, one of my kids used to always forget her jacket at school. When she was younger, there wasn’t much I could do except buying her new jackets. Last year, I told her that she may lose a jacket ONCE and we will buy her a new jacket, after all we all make mistakes, but if she loses it more than once, she would have to participate in the purchase of a new jacket.
She hasn’t lost a jacket since.
Give them Independence
Kids have so little independence these days. An allowance is a wonderful way to give them complete control over something and enable them to make their own decisions. I try very hard not to interfere with my kids’ decisions on what to do with their allowance. As long as they’re not buying something dangerous or inappropriate for a child, they can do whatever they want with their allowance. They love this independence and they absolutely do not abuse it – on the contrary, they are very responsible with their money and they spend it carefully and wisely.
Did you get an allowance as a child? Are you giving your own kids an allowance?