How to manage your kid's allowance
There's no question that giving your kids an allowance can be beneficial. Patrick Doyle, an investment specialist in Toronto, Ont., says giving your child an allowance can teach him to budget and manage his money, respect the value of a dollar, learn to be independent and develop a feeling of self-sufficiency.
It can also directly benefit you, the parent, in that it will save you the headache of regularly deciding what your child can and cannot buy. So, how do you decide how much to give and when? Here's a look at everything you need to know about giving your kids an allowance.
Merit-based or for nothing at all
Whether to give your child an allowance in exchange for reward-worthy behaviour or just for being a kid is controversial.
Doyle, for one, thinks that allowance should never be given for nothing — it should, for example, be given in exchange for household chores. The idea here is that the child earns her money, preparing her for life in the outside world when she gets older.
Paul W. Lermitte, author of Allowances Dollars and Sense: A Proven System for Teaching Your Kids About Money, sees an allowance as a tool for teaching kids about money and thinks it should be given freely, with no strings attached. Furthermore, he doesn't think it should be withheld for bad behaviour: "You don't not give your kid a book because he's being bad. You discipline in other ways — you take the TV away or you send them to their room for a timeout. You don't take away their allowance, because allowance is a tool you're using."
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If you're stuck trying to figure out how much to give your kids, Lermitte suggests paying them 50 cents for every year of their age. "So, a six-year-old would get $3 a week, and we give it to them in coins," he says, which gives the kids a better sense of how much money they're getting.
Scheduling and the issue of loans
As for when to dispense your child's allowance, make sure it's not Friday night, because there's too much temptation to spend it all on the weekend. "If you give it to them on Sunday night or Monday," says Lermitte, "they have that money sitting in their bank accounts and little wallets and purses all throughout the week, and that gives them an idea of saving. And so when it comes up to the weekend, they've had time to talk about what they want to spend their money on."
Another tricky issue is deciding how to handle your child's request for a raise.