Use the Allowance to Inspire
Regular Conversations About Money
Management
Think of the allowance not primarily as a means of
making money available to your kids, but rather as a way
to inspire regular conversations with them about money
management. Kimberly Palmer, the author of “Smart Mom,
Rich Mom,” says to “worry less about how much you give
than that you use the allowance as a chance to talk to
your children about money.” “The whole point,” says Mrs.
Palmer, “is to get them used to handling and talking about
money so it’s not so much the amount as the conversation
around it that matters.” Neale Godfrey, a personal finance
expert and author of more than two dozen books on
financial literacy, puts it well: “Talking to your kids about
allowance and money is just as important as giving it.” Mr.
Godfrey is right: research shows that the more kids discuss
money management with their parents as they grow up,
the better they become at managing their own finances as
adults.
Be Consistent – But Regularly Review
Your Allowance Policies
However you decide that your kids should allocate their
allowance, be consistent about your allowance policies
and only change them if you have very good reasons to do
so, like if you simply can’t afford the current amount
or your kids are not spending it in the agreed-upon
ways. As Dr. Mary Kelly Blakeslee, a well-known child
psychologist, says, “nothing bothers kids more than
unfairness. If you change the rules without a good
reason, you’re reneging on a contract. While children
need to learn that life isn’t always fair, you can still
respect your children’s feelings by explaining why you
have to decrease their allowance or postpone payment
and let them know you can understand their annoyance
or disappointment.” Mr. Munson agrees: Consistency
“builds trust, reduces bargaining, and encourages
planning for the future.”
Similarly, don’t use the allowance to reward your kids for
unrelated accomplishments. “Giving your kids money as a
reward,” says Joseph Hogue, a certified financial planner,
“establishes the mentality that you only need to do things
if you’re getting paid.” Instead, suggests Mr. Hogue, “let
them pick the family outing for the week or just tell them
how proud you are of their accomplishment.”
Don’t Tie the Allowance to the
Performance of Regular Household
Chores
Finally, don’t tie the allowance to regular household
chores. Doing so is wrong for several reasons: 1) it defeats
the very idea that being part of a family entails that one
has certain responsibilities, 2) it encourages your kids to
bargain every time you ask them to do something around
the house, and 3) your kids may even stop doing their
chores once they feel they have enough money.
Experts say to only offer your kids extra money for tasks
you otherwise would have paid someone else to do like,
say, mowing the lawn or painting the house. Mr. Godfrey
suggests that parents carefully distinguish between what
he calls “”citizen-of-the-household chores,” for which they
shouldn’t get paid, and “work-for-pay chores,” for which it
makes sense to give them some extra money.
Don’t Use the Allowance as
Punishment or Reward
An allowance should be used to teach kids money
management and not as punishment or reward.
An allowance, says Mr. Munson, “is supposed to
develop greater trust and better communication and
cooperation, so using it as an unexpected disciplinary
tool will just make you look cruel and arbitrary in the
eyes of your children (no matter how much they might
seem to deserve it). Find another way to make your
point while living up to the original bargain.” Nevin
Martell, a financial planner, agrees: Using money “as a
yo-yo – ‘I don’t like this or I don’t like that, so I’m going
to cut your allowance’ – is not going to help them form
a healthy relationship with money.”
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