As kids get older, it is important to teach them about money. Kids don’t learn to spend wisely on their own; you have to teach them. One of the best ways to teach your children to save their money is by making them appreciate the value of money, and giving an allowance for completing regular chores is one way to do so.
Children learn very early that money pays for things; a 2-year-old with an older sibling can understand that their older brother can buy toys when he has money. The 2-year-old might not understand the literal value of money (for example, he or she might not understand that one dollar equals 100 pennies), but still knows that money can be powerful. Young children can benefit from an allowance because learning about money encourages financial understanding. Harris Interactive completed a survey for the The American Institute of CPAs, which found that 61 percent of American parents give an allowance to their children.
While giving an allowance certainly isn’t the only way to teach children about money, it can be very effective. Parents start giving an allowance at various ages, but the AICPA survey found that 54 percent of parents begin paying an allowance by the time their child turns eight. Before your child reaches this age, you can teach them about money by setting a good example; kids will learn the most from their parents.
You can also help them to understand how much individual coins and dollars are worth, and by comparing prices at the store. Once you are ready to start giving an allowance (whether at 4, 6, 8, or whatever age you deem appropriate), you can encourage responsibility by requiring chores. If you teach a child that they have to work for their money, they will appreciate it more.
As far as how much you should give your child at various ages, many people start at 50 cents to $1 per week for every year that their child is old. So if you have a 4-year-old, your child might get $2-$4 per week. The AICPA found that the average allowance totaled $65 per month, or $780 per year, and this seems high, but this is an overall average, and many parents start giving allowance when their children are older. The AICPA noted that parents should be encouraging earning, budgeting, and saving, in addition to giving the allowance, but the study found that parents spend more time talking about good manners, healthy eating habits, good grades, the dangers of drugs and alcohol, and the risk of smoking.
Parents do seem pretty unified regarding the fact that children should work for their money though. According to the study, 89 percent of parents required children to work at least one hour a week, but children spend an average of 6.2 hours per week on chores.
You don’t have to follow the guidelines that anyone else sets. You can determine whether or not you want to give an allowance at all, how much to give, and whether or not to require chores. If you do give an allowance, requiring your children to earn the money through doing chores is a good idea. Some parents also require children to put a specified amount of their allowance away towards savings each week, and this encourages children to learn to save as well as spend.