An allowance for kids is an important part of growing up and plays a significant role in developing the ability to manage money. Seen this way, your management and communication about it may be different than if you think of it as just a tactic to control the inflow of toys into the house.
When to begin your kids’ allowance? Age six would be the right time to start, after kids can count and begin to understand the price of different things they want to buy.
And, how much to give? A good rule of thumb is $1 for every year of age, or so says The Allowance: It’s Not Just About Money in the New York Times. Or, as the article counters, “half of that,” noting that most people decide kids’ allowance based on a very unscientific survey or friends and family.
The New York Times article cites a Yankelovich study, breaking down kids’ allowances to $5 to $9 for six to eleven-year-olds, and $10-$19 for 12 to 17-year-olds (which conveniently fits the rule of thumb). Like so many things in the financial area you’ll have to figure out the most appropriate rate for your own area and child, and expect continuous negotiations, as your children get older.
A few other things to keep in mind:
Amazon has several books on raising smart money kids, and the New York Times article recommends Raising Smart Money Kids by Janet Bodnar of Kiplinger’s Personal Finance (I have not read this book). Much of kids’ allowance rules and amounts will be subject to change over time as kids develop their own tastes and needs that fall far from the opinions and view of mommy and daddy. Making a six-year-old pay for their own movie with mommy and daddy is not the same thing as watching your 17-year old roll out the driveway on her way to make her own movie choices. Good luck with the evolution in your thought process, while trying to keep a modicum of consistency in your communications.
Note: GreatDad is partnering with Active Allowance.com to provide free chore charts for GreatDad readers.