6 Reasons To Give Your Children An Allowance
At one point, your children will start leaving the home to attend school, college or university. They’ll start hanging out with friends. They’ll get new hobbies. And for parents, all those mean one thing: your children will need more money.
And yet, if they’re used to asking you for money whenever they need it, what are you teaching them? Is giving them an allowance a better alternative? Here are six reasons why it might be so.
1. They Learn the Value of Money
Money doesn’t rule the world, but it sure is important. Frugality is something many kids will pick up fast, assuming you manage to stick to the amount and schedule of the allowance you decided to give, because they know they can’t get any more until the next payday comes. As such, every cent counts, and children will learn to look at the value of the product they want, not just at their desire.
2. It Teaches Them Responsibility
Getting their own spending money means mummy and daddy are no longer as willing to buy them the next Playstation just because they throw a tantrum. If they lose their allowance, they won’t get any more until the week (or month) ends.
In other words, they’re in charge of their purchasing ability, and once they are responsible for that, that sense of responsibility will splash onto other aspects of their lives, too.
3. They Can Safely Learn from Financial Mistakes
Fiddling with allowances will allow you to let your children make and learn from financial mistakes in a safe, controlled environment, rather than leaving it all to real, domino-effect environments when they start working.
If they use up their allowance before the next instalment is due, they’ll be penniless for the rest of that particular period. When you next give them their allowance, you can ask them what they did wrong, and how to avoid it. It’s a much better alternative then letting them fall into excessive debt as young adults later in life.
4. They Learn the Importance of Financial Management
Getting a fixed allowance means that children will have to ration their money to last the allowance period. Help them divide their allowance over that period, rationing enough for everyday use, for savings, and for any extra purchases they might want to make.
5. They Learn to Manage Shared Resources
If you have more than one kid, and they realise that ‘my allowance plus my sister’s allowance equals double the allowance’, be glad. For example, if all your children want the same, expensive thing, they’ll discuss and decide whether the purchase is worth it or not.
They’re learning how to pool and manage a limited resource – in this case, money – which will help them handle similar situations when they’re working or married later in life.
6. They Learn how to Get/Earn More Money
It’s not fun when your children get financially savvy enough to ask for a raise in allowance without you doing it yourself, but look at it positively: it means that they are learning the art of negotiating a raise.
And if you’re paying them for chores that you need done around the house, it means they’re learning that they’ll have to work to earn more money.
How to Start?
The most difficult hurdle to giving an allowance is probably how to start. Don’t start with credit cards! Instead, give a physical allowance so that children can touch and feel the money they’re getting, and they can visually see their money being divided for different uses.
Encourage them to set goals for whatever they want to do with a certain sum of money. Share your own stories about spending and saving. And when they’re mature enough, open a savings account for them to graduate them to credit management.
If not taught how to manage their money properly, children will become money-guzzling black holes who regard you as an always available ATM machine. Teach them to reap what they sow, spend what they earn, and you’ll be able to build up your nest egg in peace.