Photo: Flickr / joeduty
According to DoughMain, most parents start awarding their kids an allowance at age 5.Yet 2,034 parents surveyed by the site were nearly split on the issue: half said they give an allowance, while the other half said they do not.
That’s because while some parents feel an allowance can build a child’s financial literacy, others worry it can be a breeding ground for bratty behaviour, leading to unrealistic expectations.
We spoke to Lori Mackey, owner of Propserity4Kids, Inc. to learn why giving an allowance is a smart idea.
Building financial literacy
“You can’t expect a child who hasn’t learned their ABCs to know how to read,” Mackey says. “Parents don’t expose their children to any concept of money, but expect them to go out and manage a checkbook and get a job and not go into debt.”
For women especially, simple mathematical skills help determine how well they’ll invest, spend and save down the road.
Encouraging independent thinking
Mackey disagrees with parents who argue that doling out an allowance will spoil a child. “I’m giving (my kids) the ability to earn money and make choices with what they’re going to do with that money,” she says.
Part of being a kid sometimes involves feeling pressured to dress a certain way or to own a certain item to fit in. But parents can’t always give their children what they want, and the allowance helps teach them this lesson.
“What (an allowance) does more than anything is it teaches them how money works, it gives them independence, and it builds self esteem,” says Mackey. In turn, the child will learn to save for what he or she wants, putting his money toward his or her goals.
Reinforcing good habits
Mackey recommends using an allowance to encourage positive habits, much in the same way French parents say “no” to establish firm boundaries inside the home.
For example, when Mackey’s son would say, “I can’t” or “I don’t know how” without trying a task, Mackey took a dollar from his allowance. Once he learned the consequence of his actions, he soon realised that losing the dollar wasn’t worth it and his behaviour improved.
Teaching life lessons
“I tell my kids they can have whatever they want—there’s nothing they can’t have—they just need to earn it,” Mackey says.
Once a child realises things won’t be handed to him on a silver platter, he’ll be more inclined to get it for himself. That’s not what children are typically taught now, Mackey says, pointing to millennials’ dependency on the Bank of mum and Dad, but it’s a lesson they’ll appreciate down the road.
How to set up an allowance
This is simple, Mackey says. Just take what you already spend on your child—necessities not included—and give it to them directly over time (most parents do this weekly). You can set it up in an account or hand them cold cash.
It’s easy for kids to treat money as disposable income when they know it’s coming from their parents, but as Mackey puts it, “I can guarantee they will never spend their money like they will your money!”
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