Allowance: A Hands-on Experience

By Janet Bodnar

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When it comes to money, topic A for discussion between parents and children is allowances. First, the kids want to know if they can have one. No sooner do they get one, or so it seems, than they want an advance. And before you know it they're lobbying for a raise. Janet Bodnar, author of Kiplinger's Dollars & Sense for Kids, offers advice.

Basic rules for success
It isn't only parents and children who lock horns on this issue. Parents often disagree with each other about such things as how much to give and whether kids who get an allowance should be required to do chores in return.

No single allowance system will work for every family. But any system will work if you follow two basic rules for success. One: Don't start giving an allowance until your children are old enough to manage it. Two: Keep the system simple so that you can manage it.

If you think that by denying your kids an allowance you'll be able to limit the amount of money they get their hands on, forget it. Studies show that kids who don't get allowances have access to about as much money as kids who do.

Teaching money management
Since they're apparently going to get the money anyway, it's better to have them learn to manage it themselves than nickel and dime you to death. With an allowance, both of you will actually have more control over your children's finances?especially if you make it clear to the kids that the allowance isn't bonus cash, but will take the place of money you normally would have spent on such things as comic books, trading cards, art supplies, hair bows, or other kid-related expenses.

You don't need to give an allowance until your children are at least six years old. You don't want to rush things, and preschoolers generally don't understand the abstract idea of money anyway. Whether you give them 50 cents, $1 or $2, for example, they're not quite sure how much they have or how far it will go.

Once children start first grade, they begin learning about money in school, so they'll know that if they get a $1 bill each week, that's equivalent in value to ten dimes or four quarters. They'll also have some idea of how much their dollar will buy. If your child is 9, 10 or even older and you don't already give an allowance, it's not too late. Some parents have even started their kids on an allowance when they became teenagers as a rite of passage to becoming more grown-up.

How much is enough?
When setting an allowance, you should give enough so that your children can squander it, but not so much that you'll be upset when they do. Sit down with your children and decide what expenses their allowance will have to cover. You might expect an 11-year-old to pay for his or her own movie admissions, but that's probably too much to ask of a 6-year-old.

Don't underestimate a kid's cost of living. Take a lesson from Lamb Chop, the puppet on the perennially popular PBS show starring the late Shari Lewis and her animal friends. In one episode, the lovable lamb was negotiating for a raise in her penny-a-week allowance. "Do you buy anything?" asked Shari. Retorted Lamb Chop, "If I save it for 12 weeks, I can blow it on a pack of gum." Shari and Lamb Chop eventually settled on 7 cents a week, but if you're going to leave room for a pack of gum your children will need at least a quarter, not the nickel of your youth.