The Smarter Way to Pay Allowance

From our provider:

Rated by 1 member

0 Comments

"Allowance" is defined as "a sum of money or goods given regularly to family members." Each family has its own way of handling allowance. Some families do not give allowances to children, even if they complete chores. Other families give out allowances, but these gifts of money are not connected to the completion of chores. When used correctly, allowance can be an important educational tool in teaching your children the value of money.

Because we are most likely our child's only source of income, giving them money for nothing creates an "entitlement attitude." When they earn their allowance, however, they will appreciate it and put a value on it.

In searching for a better way to teach my children about money, I started researching what the wealthy people teach their children in terms of an allowance. There is a difference in what the wealthy teach and what the majority teaches. Billionaire John D. Rockefeller educated his five children about money by using an allowance system.

Rockefeller's children received 25 cents per week, plus they had the opportunity to earn additional money by growing vegetables or raising animals. He also required each of his five sons to record their expenses. They had control over their money, though they were asked to give 10 percent of their earnings to charity and to save 10 percent.

As the Rockefellers demonstrated, it is never too early for a child to learn how to earn, manage, appreciate and account for money.

In the beginning you are your child's only source of income, other than gifts they receive from friends and relatives on special occasions. What you choose to do regarding an allowance will have a profound and lasting impact on your child. I encourage you to become a parent who instills in your child the value of money by doing the following:

Begin helping your child learn the relationship between money and the value of service by tying an allowance to services rendered. Begin as soon as your child understands the relative value of money (a dime is worth more than a nickel). In this way, you will teach your child that service of greater value warrants a larger reward/payment.
Each family has their own income bracket, and every family determines how much to spend on each child throughout the month. Let's break down how much you spend on your child. Imagine that you spend $50 on your child each month for "non-essential" items (things other than clothing, food, etc.). This is approximately $12.50 per week or $1.78 per day. I propose that if this were the case, you should give your child the opportunity to earn an allowance of $50 per month, the amount you are already spending on him to buy things he wants, but does not necessarily need. When you spend this $50 monthly, he is influencing you about how you spend YOUR money. When he earns this $50 instead, he learns that he must decide for himself how to spend HIS money, and this will have an invaluable impact on his learning the value of money and the importance of his choices. Remember, can no longer buy the non-essentials for them; they must bring their wallet with them everywhere.
Begin using the 10/10/10/70 concept from the very beginning. Children should give away 10 percent of their earnings, save 10 percent, invest 10 percent and spend the remaining 70 percent wisely. As soon as you give your child his or her first allowance, begin using a Money Mama Piggy Bank or your own containers to start practicing giving, investing and saving as part becoming wealthy.
Use an allowance to instill the value of money in your child. Since they'll be spending their own money and not yours, they will think twice about what they spend their money on.