While some believe that giving an allowance for chores teach children responsibility and provides them with a form of income, others feel that children should not be paid for daily household activities such as washing the dishes or taking out the trash. Some parents believe that simple tasks are part of being in a household; the chores have to get done and the kids should have no incentive for doing them. Whether or not you choose to give your children an allowance, it is important to teach them how to budget and save money for their future.
Whether you decide to link chores and allowances or make your child go the extra mile for their earnings, discussions about money should start at an early age. It is important to always be open about finances and not dismiss a child’s questions.
“I think you should have a relationship with your children to speak with them about all kinds of matters,” said Michael J. Kessler, CPA, business profitability and finance expert whose office is located in Seaford. “Money would just be one. Have an honest and open discussion. I’ve guided my kids to know that they should be investing in their retirement. One of the most important things is to never argue about money in front of children.”
When the child loses his or her first tooth is when the ongoing discussion should begin because he or she has now experienced the gift of cash. It is then time to begin linking chores to allowances or having them perform extra services to earn money.
“When the children are maybe in their early to mid-teens they should get their own job, like mowing lawns,” said Kessler, who has appeared on America’s Premier Experts show. “They need to be introduced to the idea of handling money and knowing what it is prior to entering college. Chances are they’re going away to college and they don’t know how to handle money or use credit cards.”
The amount paid to kids should be based upon what you, as a parent, can give. Options include weekly and monthly allowances. The amount can be set based on age or the amount of work the child does. Kessler explains that delayed gratification should be utilized when giving allowances.
“Just because they can have something now, like a new video game or something they want, delaying, similar to someone who is deferring income into a retirement account, could [teach them how to handle their finances],” Kessler said. “Tell the kids to maybe save a little more and in two months they can have it. Sometimes when you say wait a few months they may not want it anymore.”
Parents should explain to children that some of their allowance is to be saved while some can be spent. Kessler explains that about half to two-thirds of a child’s earnings should be saved for college and saving should begin as early as possible.
In order to get a child to save his or her money, beginning at an early age, have a two-jar
system in which half of the money goes into a “save” jar while the other half goes into a “spend” jar. This allows the child to grasp from a young age the idea that some money may be spent while the rest should be saved for the future.
“Don’t make it a one-time conversation,” said Kessler. “It’s a continuous learning experience for kids. Start as early as you can and save as much as you can.”