By Katherine Ryan on July 21, 2017



Why an Allowance?

An allowance provides kids with the opportunity to learn and practice money skills before they earn from their first job  An allowance provides them with safety and room to make mistakes.  Chances are your children began the process of learning how to ride a two-wheeler with a tricycle and then progressed to a two-wheeler with training wheels before graduating to a two-wheeler  An allowance is similar to a tricycle and money they earn is similar to training wheels.  Here are my top 5 reasons why kids should get an allowance.

1.  To Learn How to Budget

A regular, monthly/weekly allowance works well because it consistently reinforces the idea that they have a budget, and they need to find a way to fit their monthly purchases into that budget, because if they spend it all on the first day of the month or week, they need to wait until they have money again.

Recommendation:  Weekly allowances for children under the age of 16 and monthly for youth 16 and over.  Consider your child’s maturity level when making the decision for weekly or monthly allowances.

Potential Pitfall:  Don’t bail them out!  It will be hard but only by not bailing them out when they have run out of money will they learn the importance of budgeting.

2.  To Develop a Sense of Priorities

Parents still buy necessities (food of course, basic clothing and shoes, school supplies and books) but they need to pay for the extras. All the extras? Extras include video games, fashion accessories, candy, mani-pedis, fast food and other purchases. When kids pay for things from their own money they can be more selective about their purchases. When it’s your money, they may want to buy everything in sight, but when it comes out of their own allowance, they learn what is important to them and what they want to say “No” to.

Recommendation: Before moving to an allowance system, sit down with your child and educate her/him about the cost of certain items.  Help them gain an understanding of how certain purchases may impact their ability to do or buy other things.

Possible Pitfall: Their priorities may not be your priorities & that is okay!

3.  To Experience Delayed Gratification

In addition to an allowance kids may receive money for birthday and holiday gifts. They may also earn extra money when they do extra chores.  Help your child identify a short-term savings goal (6-12 months for a teen, 1-6 months for younger kids) as well as a long-term savings goal (>1 year for teens, 6 -12 months for younger kids).  Delayed gratification can be tough to endure and it is a good learning experience.

Recommendation: Help them identify the goals, research the price and determine how much they need to save each month or week.

Potential Pitfall: It may be a few times before they can see a savings goal through.  Do not buy the item they were saving for if they abandon their plan.  And what they want to save for may not be your idea of what you would want them to save for.  Remember, it is their money, their goal.

4.  Experience Responsibility

When your kids have their own money, they learn responsible behavior and taking responsibility for one’s actions. For example, if one of your kids seems to always forget her/his jacket at school you may want to give him/her a warning that if s/he loses or damages an item (such as a jacket) and it needs to be replaced then your child pays for the replacement using her/his own money, include damage to cell phones.

Recommendation: If your child damages a cell phone consider your child’s age and responsibility level when determining how much they should contribute. If you feel your child needs a cell phone and your child cannot afford the replacement cost, consider a flip phone or a smart phone with no Wi-Fi and no internet access until they can reimburse you or work off their debt.

Potential Pitfall:   This may be hard to implement, remind yourself that tough lessons now may avoid tougher lessons later.

5. Increased Independence

Kids have decreased independence these days. An allowance is a wonderful way to give them control over something and enable them to make their own decisions. Try very hard not to interfere with your kid’s decisions on how to spend/save an allowance.  As long as they’re not buying something dangerous or inappropriate let them do whatever they want with their allowance.  Chances are they will love and appreciate this independence and not abuse it.

Recommendation: Enjoy watching your child develop and grow!

Potential Pitfall: Praise more than Criticize at a ration of at least 5:1

Five Things to Encourage Your Child to do with Their Allowance

  • Spend on something fun, including the occasional splurge
  • Spend on gifts for others and not only at traditional gift giving time
  • Save for a long-term goal
  • Save for a short-term goal
  • Donate to a charity, either a percentage or a fixed amount, ideally monthly

My next blog will address how much an allowance to give your child and how to implement an allowance system.

KMR07. re-size 3 07.14 D~Katherine Ryan is a LMHC (Licensed Mental Health Counselor) practicing in Topsfield, Massachusetts where she enjoys helping adults, children and teens become unstuck through counseling, mediation or equine assisted learning and growth opportunities.

109 (2)~Nina is a 3 year old Standard Poodle who enjoys playing catch, hiking, belly rubs and going to work with Katherine



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