Through the years, various theories have been put forth and argued regarding financial allowances for children. But two approaches seem to have emerged and become the “norms” over the past decade. Although many parents do not carry or buy with cash today, children are still aware that something is “traded” for every purchase that the family makes.

So, whether it’s cash, debit, credit card, or a loan of some sort, it becomes evident to kids that an exchange of resources takes place to get the things the family wants and needs. And to guarantee that children understand the seriousness of spending and how that exchange of money works, it’s arguable that allowances can be an excellent way to teach these lessons from an early age.

Give an allowance just to give an allowance

One way that families decide to handle children’s allowances is to give an allowance “just because.” In this case, children typically receive money weekly once they reach a certain age. Children aren’t given “work” to receive said money. Some advisors suggest between $.50 and $1.00 per week based on the child’s age. In this theory, children are taught that every household member has “work” or “chores” simply because they are part of the family. This allows a terrific opportunity for children to learn how to receive and use their own money.

The allowance isn’t tagged for the child’s needs; in other words, the child is not required to supply their own food or clothing. The money received is simply there for the child to use for things they want. In addition, the child is often directed at a very young age to save, share, and spend the money.

You can use literal piggy banks, jars, or even envelopes to separate the weekly funds according to the separated money’s intended use. Parents can hold ongoing conversations with their children to discuss how and where to save money. Additionally, the family should continue to research to determine favorite places for giving. Children often have significant and tender hearts for causes, so demonstrating ways to share and help is something most kids engage with very quickly.

Giving an allowance for chore completion

The second popular theory is to pay children in the family for completed chores. Advisors and educators who address the allowance issue in this way provide a wide variety of creative ideas on how to dole out the work and the allowance accordingly. Of course, work for kids should be age-appropriate and thus, in this approach, grow in complexity along with the children as they age. For instance, it’s relatively easy to teach the kids to put their coats or backpacks away when they come into the house. This minimizes clutter, avoids losing things, and creates a more organized feeling at home.

Mudrooms or various simple storage compartments can be created at the door to facilitate these tremendous lifelong habits. Or, kids can be taught to take their belongings to their room immediately and, once again, put them in a specified place. The adage, “a place for everything and everything in its place,” is a good one to repeat often.

Allowance key considerations

One thing to consider: if the family chooses to pay allowances based on “work” or chores completed, is that confusion may erupt when and if the children figure out that they can play the parent(s) and offer to do more chores for more money. Therefore, a family will need to lay down rules early on in this approach so that kids don’t start to think they can manipulate situations to get what they want all the time or create a competitive environment. It requires setting simple but very defined parameters. However, this may ask for more effort than parents want to make over the years. Here are a few more considerations for chores that a parent could pay their child for taking on:

· Putting dirty clothes in the hamper or designated place

· Taking tableware and placing them in the dishwasher

· Cleaning up the bedroom at regular intervals

· Assisting with house cleaning, based on age, level, and ability

· Assisting with or doing lawn work.

So, if your household determines that allowances will be a part of your teaching strategy, it’s best to have that discussion before children enter the picture. Parents have to be on the same page regarding money (among other family practices and values). Otherwise, kids will pick up on the discrepancy instances, allowing them to manipulate the situation and robbing them of the opportunity to learn a valuable life lesson. Having an agreed-upon and specific plan of action before children come along is the wisest way for couples to proceed.

The bottom line

No matter what theory or practice a family determines works best, one thing is for sure; kids desperately need to learn the life skills necessary to use money effectively and efficiently. Parents are the front line in introducing the concepts that will best lead their children to achieve good money management practices. It’s never too late to start. Today is a good day to have the conversation and implement practices that lead to peace and security for all concerned.