Of all the factors you have to weigh as a parent, allowance is one of the trickiest. Should you give allowance or just give your kids money when they need something? Those $150 pair of jeans may look cool, but how can you explain to your 13-year-old daughter that you can’t afford them?
Pamela Erwin taught kindergarten through 12th grade for 20 years and is now the Senior Vice President of the Wells Fargo Foundation. Erwin says a set allowance every week should be given based on the completion of extra chores around the house, such as mowing the lawn or washing the car. A child shouldn’t be rewarded for daily tasks that are part of their responsibility as a family member, she says.
When pay-day rolls around, don’t just hand over the dough. Erwin says it’s important to have a discussion on how the allowance could be spent or saved. She suggests increasing or decreasing the allowance based on behavior, or putting it on hold when children mismanage their money. Erwin’s philosophy is that kids should learn about making trade-offs now. “When we overspend our credit card, we don’t have any plastic for a while,” she says. Building a back-to-school clothes shopping budget together is a great way to talk about choices, and needs versus wants, says Erwin. If your daughter really wants the $150 pair of jeans, she’ll have to get the bargain sneakers.
If you thought those jeans were expensive, just wait. Erwin says be prepared for children to become active consumers in middle school. And be prepared for coveted items like denim, to make way for something even more expensive... wheels. Don’t let big ticket items, like cars, put you in panic mode. Erwin suggests you give your daughter an incentive to save up by matching her savings for that hot rod.
For families that can’t afford allowances or incentives, Erwin encourages parents to sit down with their children and explain: “This is how much money we have coming in this month and this is how much we have going out. Can you come up with ways to cut coupons, so if there’s a little extra you can buy a treat for yourself?” Erwin says this way kids can feel empowered as part of the solution, rather than bitter because their parents can’t give them what their friends have.
Erwin has created a free on-line financial literacy program with the Wells Fargo Foundation called Hands on Banking. To learn more about this program visit www.handsonbanking.org.
Don’t make money a mystery for your kids. Including them in your family budget talks will make their allowance go that much further.