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With two young kids of my own, I’ve been wondering when to start giving them an allowance. If now is the right time, how much should I give and under what terms? Are they going to squander the allowance on stickers, candy, and cheap toys? If you ask a dozen parents about allowances, you’ll get a dozen different perspectives. To help figure out my own decision, I was able to tap into the real life experiences of fellow parents and Wells Fargo team members.
Ask yourself whether the child is ready for an allowance. Susan Panganiban, Wells Fargo team member and mom, first tried to start an allowance when her child was 2 years old, but found it was too young since a 2-year-old doesn’t have any expenses. Colleen Rowe, Wells Fargo team member and mother of two, decided to wait to give her children (the oldest is 5) an allowance until they were “able to better understand what that means.”
When it comes to the amount, it might be helpful to ask friends and family what they’re giving. Personally, I like the idea of some kind of benchmark. Some families base the allowance on the age of the child, such as 50 cents or $1 per year. When it was time to give an allowance again, Susan gave her daughter $2.50 per week when she reached 5 years old, receiving 50 cents for each year of her age. Older children might seek higher allowances as their independence and expenses increase.
This is a tough choice for many families. Some moms like Gillah Hernandez, Wells Fargo team member and mom, decided to tie allowance to chores, so that her 9-year old could understand that “money isn’t free, but earned.”
Other families might decide to not tie the allowance to chores with the thinking that helping around the house is the responsibility of everyone in the family. As Susan commented, “Ultimately we decided not to require chores for allowance. We all contribute to household chores and Reese does age-appropriate chores to help out. If she does not do her chores she loses privileges … Her allowance is to help her understand the concept of saving, spending, and making trade-offs.”
Some families might try a blended approach, where the child receives an allowance not tied to chores, but then allow them to earn extra money by helping out more around the house.
This is a relevant question whether or not the child receives an allowance, as they might get birthday money or other such gifts. Team Member and mom of two, Kelly Brewer says she talks about money management basics with her children, so they can understand real-life decisions. She explained, “We may not buy something one day and it’s not because we don’t have money for it, but because buying that means that we may not be able to buy something else – trying to demonstrate how we’re always making trade-offs.”
In Gillah’s family, “I remind him to think twice when he wants to buy something that I think is wasteful or impulsive, but I ultimately leave the decision to him. This has resulted in him regretting his purchases sometimes which I think is a valuable lesson learned.” For Colleen, they “usually end up splitting the cost of something, so that he can appreciate the reward of saving but doesn’t have to wait too long.”
I like the idea of having some rules or principles in guiding the use of the allowance. Some families use accounts or simple money jars to separate money for saving or donating to charity, while the remainder can be used for spending. For Rebecca, the rule is to spend half and save half, making regular savings deposits into their accounts.
It’s exciting to hear how allowances can help children understand the value of money, along with saving towards a goal. Rebecca Martinez, team member and mom of three shared, “We said we would not pay for a video game because it was too expensive, but allowed them to pay for the game with their money if they wanted it badly enough. They understood how expensive it was and how many months of chores it would take to earn the money to pay for the video game. They passed on the game, and chose to keep the money until they either saved more, or waited for a sale.”
Susan noted that she regularly sees her daughter making decisions about trade-offs. Susan commented, “Deciding not to buy the item she can afford today, like a new coloring book, but saving a few more weeks to get a special dress or a new doll. She’s really proud when she saves up for something big and it seems to have more meaning than if we just bought it for her.”
As you can see, there’s many different ways to approach an allowance. The good news is, when searching for the “right” way, the best advice is to choose what fits best within your family.
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