Using allowances to teach money management to children

Without a doubt, parents are responsible for teaching their children the value of a dollar and the importance of being financially responsible. Allowances are payments given by parents to their children, typically on a weekly or bi-weekly basis, for completing a set of predetermined tasks, usually household chores. Allowances are a good way to teach kids about money because these systems allow children to develop skills they will need when it comes to handling their own finances later in life. Kids who earn allowances are more likely to be accountable, financially responsible, and independent.

Accountability

It may seem rather counter-intuitive to pay a child for household work that needs to be done, and should be done. However, an allowance system creates an incentive for kids to complete tasks; therefore, tasks that were once viewed negatively as “dull” or “boring” can be seen by kids in a more positive light. When kids are solely responsible for completing a particular chore, they are held liable if that task is not completed. For example, if your child is paid an allowance to do the family’s laundry each week and he or she does not accomplish the task, and then he/she will have to live with the consequences (i.e. no clean clothes). Moreover, if the task is not complete, other members of the family who were relying on the laundry being done can hold him or her accountable. This sense of accountability will help kids to understand that they are contributing to the household in a significant way. This accountability allows them to feel a sense of purpose within the household aside from just being a member of the family.

Financial responsibility

Once kids receive their allowances, they are usually able to do what they please with their earnings. When a child has his or her own money, he or she is more likely to understand the value of a dollar and recognize the importance- and sometimes the difficulty – of saving. This concept of savings can help kids become more financially responsible. Having to earn money will make a child less likely to spend frivolously and more likely to save up for “big-ticket” items that their parents are unwilling or unable to purchase for them.

Independence

Children who earn allowances are also much more likely to be independent. If a child wants to purchase something that his parents cannot or will not buy for him, he can do so as long as he has been financially responsible with his allowance earnings. For example, if a teenager saves his allowance to buy a car, he ultimately has played a role in further establishing his independence. With a car, he will be more able to go places on his own and of his own accord.

Household skills

Finally, kids who earn allowances are much more likely to hone their household skills. In other words, when a child is responsible for doing chores around the house, he or she is effectively getting “practice” in taking care of him or herself and the family. Learning how to do laundry, cook dinner, or do other household chores will help your kids develop skills that are necessary to take care of themselves and their families in the future.

In summary, it is clear that there are many advantageous reasons why parents would want to use an allowance system to teach their kids about money. Without a doubt, kids who earn an allowance will be far more likely to excel in household skills, live independently, and be accountable adults later in life.