Monday, February 3, 2014

Giving Your Penny Savers an Allowance (Or Not)

Giving Your Penny Savers an Allowance (Or Not)

Families have different philosophies about allowances, depending on their histories, values, and attitudes regarding money. Some parents require children to do regular chores to receive an allowance. Others believe all family members should do chores and allowances should be unconditional—kids automatically should get part of the family's income. Some don't tie allowances to chores, but do pay for extra jobs, like cleaning the garage.
Other parents don't give allowances at all, but dole out money as children need it. If you use the "dole" method, try tracking how much you hand out—you might be surprised.

Model good financial behaviors

Whether you give your children allowances or not, remember that they learn by observing. "The more conscious you are about what your behavior teaches children about money, the more effectively you'll model good habits," says Sharon Danes, professor and family economist, University of Minnesota, St. Paul. "If you're not paying attention, you may be teaching them things you don't want to."
If you use the "dole" method, track how much you hand out—you might be surprised. "If you condition a kid to getting money without working for it, that kid will say, 'Why work?'" notes Mandell. "If kids earn their money, they tend to view work more positively."
Look for teaching moments 

Just having money doesn't teach children how to manage it. Whether your children work for allowances or receive them unconditionally, look for teaching moments when you pay up. That way either method can help kids learn to manage money.

"By just handing over money without talking about the responsibilities and opportunities associated with it, parents miss an opening to instill values and educate children about the multiple purposes of money," says Philip Heckman, director of youth programs at the Credit Union National Association (CUNA), Madison, Wis. "It's really important to have those discussions, and they don't need to be big lectures; they can be normal, everyday conversations."
Give consistent messages, or children get very good at playing parents against each other.

Make the rules clear

In two-parent households, be sure you're both making the same teaching points. "Give coherent, consistent messages, otherwise children get very good at playing one parent against the other," Danes advises. "And involve kids in the decisions."
If you give allowances, your family needs to decide what things parents still will pay for and what the children will be responsible for. "And children must be aware of the rules so there aren't arguments later," says Danes.
That goes for nonroutine paid jobs, too. Heckman believes allowances shouldn't be contingent on doing chores, but that parents should offer payment for special jobs. "You have to be very explicit about the standards of completion," he says. "If they're cleaning out the garage, agree on what that means, such as moving everything into the driveway, washing the floor, and putting everything back."
Decide how much
With any allowance philosophy, there's no set amount that fits each child and each family. "It depends what you want your children to be responsible for paying," Danes says. "Figure out how much they need, plus some discretionary money so you have something to teach them about.

"Then think about how often you'll give increases and what you'll base them on," she continues. "You don't have to set the schedule in advance, but children are very concrete thinkers. Tell them, 'Next year on your birthday, we'll talk about it again.' It's helpful for them to know that it's just like you get raises at work."

As kids get older, you can encourage them to set goals, Heckman notes. "They can track their progress and get the satisfaction of earning money and getting something they couldn't without saving."

It takes time and effort to teach kids about money. "But it pays off in the long term," says Danes.

Read the entire article here.

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