Allowance Basics
Nicholas Dewsbury, 6, and his brother, Manny, 9, have individual styles when it comes to saving and spending their weekly allowance. The sibs, who live in Langley, B.C., get three dollars apiece. And while Manny tends to put the allowance away and forget about it, Nicholas will spend time examining and counting his cash. “He’s very organized and usually knows how much money he has,” says his dad, Jeff.
It’s not unusual for kids to treat allowance differently. But this age is a prime time to familiarize them with money, says Alberta-based financial expert Kelley Keehn. “This is the age where we want to start forming good money habits,” adds Keehn, who’s also author of The Prosperity Factor for Kids (Insomniac Press).
Thinking of introducing an allowance to your little millionaire-in-the making? Here are five tips to keep in mind.
1 READY OR NOT Is your child ready for an allowance? Yes—if your expectations aren’t high. Kids this age don’t yet understand the true value of money, says Jeffrey Derevensky, a professor of child psychology at Montreal’s McGill University. “If you ask a young child if he’d rather have a nickel or a dime, he’ll often say a nickel, because it’s bigger.” Six-year-olds also have trouble with delayed gratification, so the concept of saving is still beyond them. But with an allowance you can start to teach basic skills like how to add money together or make a simple purchase.
2 NO TIT FOR TAT Don’t dish out allowance in return for chores your child would be expected to do anyway, like making her bed or clearing her dishes. An allowance should be given with no strings attached. “Chores are basic duties for each member of the household. You shouldn’t get paid for them,” says Keehn. But if your daughter is itching to earn a bonus beyond her base allowance, let her help you clean up the garden or tidy the car for extra dough.
3 NO FINES FOR MISBEHAVIOUR Your son pushed his baby brother again? Consider cutting out dessert or TV time, but not allowance. “I really encourage parents to never withhold money as a punishment,” says Keehn. “There are so many issues about shame and money.” How often have you used the phrases “filthy rich,” “dirt poor,” or “dirty money”?
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