Giving a kid an allowance is a chance to teach young people how to value and manage their own money. However, many parents may struggle with calculating how much is enough to give. If you’re stumped about how much allowance to give a kid, and how often, there are a few essential points to consider.
Update your thinking about money
For starters, parents should ditch the idea of giving kids money for doing chores around the house, unless it’s something out of the ordinary. Giving kids money for washing dishes, cleaning their room, or walking the family pet teaches them that they should get paid for contributing to the household.
If a kid does something wrong, consider taking away privileges instead of their recurring allowance. Don’t give a kid an advance if they’ve already blown through their funds. An allowance introduces kids to fiscal responsibility, so kids need a chance to learn via trial-and-error.
Sum up the numbers
Giving kids the same amount of money parents received as a kid won’t cut it, because a dollar doesn’t go very far anymore. If an older kid is being given an allowance as spending money on daily expenses, it should be an adequate amount to cover costs.
A good formula to follow for calculating allowance is to give a child a dollar for each year of their age. Depending on a parent’s financial health, it good to discuss how often a child is to receive an allowance and the use for the money. On average, kids get an allowance every week or every other week.
Stick to a formula
It is easier to teach your kid the importance of budgeting by giving an allowance as scheduled. If a kid wants to negotiate terms, provide an opportunity to do so, and be fair.
Kids can learn to value their money if parents encourage them to set aside some of their allowance for long-term savings, charity, or investing. Consider the Consumer Price Index to determine what would be a reasonable amount to give on a regular basis, as the prices for things have changed a lot since the good old days.