Parents, you may think giving the kids a few dollars a week is a good idea, but are you sending them the right messages about money? How do you know if you’re really getting through to them or just becoming a “human ATM”?
Financial professional Kaleb McCarty is here to talk about 5 mistakes parents are making when giving kids an allowance.
Starting too late. McCarty recommends giving kids an allowance when they can distinguish the difference between wants and needs, and when they can count. This usually happens around preschool or kindergarten age. He says, if you start early, kids will develop an appreciation for money – both saving it and using it. That appreciation has a much better chance of sticking with them throughout their lives.
Focusing Too Much on the Amount. On average, kids in the U.S. get $67.80 per month and one in four get $100 or more per month. Whatever you choose to give your kids, the amount matters less than the conversation you’re having with them about money. Start with a dollar a week or so for each year of the child’s age and divide the money among three containers: save, spend, and give. This is like a mini-version of an adult budget. You’re teaching them the basic foundation of finances.
Tying all the money to chores. Most parents have their kids do chores for their allowance. But some parents feel that kids should take on chores and household responsibilities because they are part of the family and everyone should be contributing. You can pay for chores that are outside of their regular weekly or daily jobs. Just make sure they equating “effort or work” with “money”.
Giving money with no strings attached. Agree on items you expect your kids to pay for. When they’re in middle school, have them pay for their own snacks at school or new video games. As they get older, they can cover larger purchases. Let your teen manage a lump sum you’ve budgeted for back-to-school clothes, for example.
Bailing them out. If kids make mistakes, let them experience the consequences. Don’t bail them out. If they get their allowance on Friday, but discover something they want on Wednesday – have them wait. When their money’s gone, it’s gone.
So what if kids as for a raise? McCarty says that’s a great time to teach them about negotiating. When is the last time they were given a raise? Are they doing something extra to deserve a raise? What amount of the raise will they save and what will they spend? The most important thing to remember is to not just hand over money without a valuable lesson to go along with it.