When it comes to teaching your children how to responsibly handle money, an allowance  can be a good tool. An allowance, whether it’s tied to chores or not, can provide your children with their own money to mange, and provide you with the chance to offer hands-on, practical experience related to finances.
However, deciding to offer your kids an allowance is only the beginning. You also have to figure out how much is appropriate for your children to receive. It’s no good if your child’s allowance doesn’t provide him or her with enough to effectively manage their decisions, or realistically save up for some items.
Deciding How Much to Pay in Allowance
As you decide how much to pay your child in allowance, there are three main factors to consider:
- Age: First of all, consider how old your child is. An eight year old has very different spending habits and requirements than a 15 year old. Take that into account. The things that a young child has access to, and can buy, are usually less expensive. Additionally, it may not be necessary for your pre-teen child to set aside as much for long term savings, while you will want to provide a bigger allowance to an older child, and ask that a greater amount go toward college savings  or some other long term event. Another age related consideration is whether or not your child has a job. If your teen is old enough for an after school job , it might be time to wean him or her off the allowance.
- What your child is expected to pay for: Another consideration is what you expect your child to pay for out of his or her allowance. If the allowance is just for learning to save and make wise spending decisions, it doesn’t need to be as large as if you expect your child to help pay for extracurricular activities or buy all of his or her own clothes. Be clear about what you expect your child to pay for ahead of time so that he or she knows exactly how to allocate his or her funds.
- Your family’s circumstances: You also need to consider your family’s circumstances. While it would be nice if you could afford to give your child a very generous allowance, you might not be a in a financial position to do so. Carefully examine your finances and use that as one of the factors in deciding how much to give your kids in terms of allowance. Let your children know the reasons behind the smaller allowance, and make sure that they see you practicing frugality, and making sacrifices. That way, it’s more of a family effort.
Adjusting Your Child’s Allowance
An allowance doesn’t need to be set in stone. Periodically speak with your children about their financial goals, and their allowances. You can add more to the allowance as your kids get older, or reduce the allowance as they make more of their own money. Be clear about why you are paying allowance, and make it clear that an allowance can be adjusted over time.
(Photo: Memory_Freak )