Tips on Allowances for your Kids

I am on Fox this week and decided to talk about allowances for kids. We have been giving our kids allowances for about a year. Recently we have established a "matching" program with them. We thought that IPads for each of them would be great, so we told them that if they saved half the amount we would match it. This way they started to save their money which is a great lesson, and got a great item in the end, and we save a ton of money....true win-win.

Here are the tips I found from my online research. Enjoy.

Allowances for Children

Financial experts say the money troubles that plague many of us as adults often stem from the way our parents raised us to view and handle money. No matter what financial demons might be haunting you, money professionals say you absolutely can break the cycle for yourself and for your own children. One way to do this is to make wise use of a simple, time-honored tool: Allowances.

Just like we teach our children good hygiene, good manners — anything that’s a critical life skill — that’s what we have to do with allowance. When you introduce allowance you have the opportunity to teach your child how to control impulses and delay gratification.

Key Tips when you think about Allowances

1) Start young. As soon as your child understands money and the value of items, start an allowance. If they are asking for toys every trip to Target, it is time to educate them about money.

2) The allowance amount should be age appropriate. The amount should be based on what you expect them to pay for and set accordingly. For younger children less than $5 a week is fine. As children get older and you expect them to pay for more items, the allowance should be increased accordingly.

3) Pay kids in cold, hard cash so they understand its value (vs. a debit card)

4) Pay them the same day each week or month, so they understand it is based on the work they have done, just like a real job

5) Assign financial responsibility when your children get older. If they want a certain brand of clothing or toiletries, assign them this responsibility. If they earn money they also have to pay for some items. You can increase their allowance accordingly when you do this.

6) Set an amount your children have to save, invest or donate each month. This will get them into good habits that will last a lifetime, be sure they are not allowed to spend it as soon as they earn it.

7) Do not give an allowance “per chore” but instead agree to a list of things your child will do each week to earn the money. So if you keep your room neat, clear the table after dinner, put out garbage and put away your clothes you get x amount.

8) Pay children extra money for extra jobs such as mowing the lawn, washing windows, washing the car or helping to clean the garage. These are great things to offer if the child is saving for something big.

9) Establish a “matching” program for big ticket items if they child keeps up good grades and good behavior, This teaches the child how to save for long-term and that if they are willing to work hard you will chip in to help versus just handing them a big item.