Dos and Don’ts
of Giving Your Kids an
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— by Tanni Haas
ou can teach your kids important money manage-
ment skills by giving them a regular allowance.
But how do you ensure that they end up learning
what you want them to learn? What are the most important dos
and don’ts when it comes to giving your kids an allowance?
Communicate Clear Expectations For Spending, Sav-
ing, and Giving — It’s an important thing to communicate clear
expectations for what your kids are supposed to do with their
allowance. Experts agree that if you want to teach your kids
about the value of money and also encourage them to become
caring human beings, then require them to divide the allowance
into three parts: spending, saving, and giving. “This is an excel-
lent way to expose them to the three most important things they
can do with their money,” says Brad Munson, a personal finance
expert, “and it’s a lesson that can last a lifetime.”
Come to a mutual agreement about how much money they
are allowed to spend, how much they are supposed to save, and
find a charity that they truly care about. As Susan Borowski, the
author of “Money Crashers” puts it, having kids “choose the
charity of their choice will make them more likely to set aside
the money. Just like we give to charities that matter to us, chil-
dren also need to give to a charity that matters to them, or they
won’t be motivated to do it.”
Use The Allowance To Inspire Regular Conversations
About Money Management — Think of the allowance not pri-
marily 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.”
16 WNY Family September 2018
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 allo-
cate their allowance, be consistent about your allowance poli-
cies 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.”
Don’t Use The Allowance As Punishment Or Reward —
An allowance should be used to teach kids money manage-
ment and not as punishment or reward. An allowance, says Mr.
Munson, “is supposed to develop greater trust and better com-
munication and cooperation, so using it as an unexpected dis-
ciplinary 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.”
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 accomp lishment.”
Don’t Tie The Allowance To The Performance Of Regu-
lar Household Chores — Finally, don’t tie the allowance to
regular household chores. Doing so is wrong for several rea-
sons: 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 “cit-
izen-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.