Allowance as an Educational Tool

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There are arguments for and against giving kids an allowance.  We can look at struggles of the younger generations to see where improvements can be made.  Although developing a work ethic is important, an allowance has many benefits.  The ideas of saving, investing, and money management are just a few.

Allowance: Earning vs. Owed

The most important part of providing children an allowance is that it presents an avenue for them to earn things.  Even though you may still give your kids all sorts of gifts, an allowance is a way to couch the giving as something they earn.  Thus, when you want to get your child the latest video game system, do not just give it to them.  Make it something they earn by a steady stream of chores or a special additional task.

When something is not given but treated as earned, it helps provide a sense of entitlement.  This works on a personal and societal level.  A child raised to consider work as tied to possessions and success will respect others.  If a child is raised to think that everything is given or not without rules, then it is easier to think all success is simply luck.  This undermines the reasoning for a work ethic.

Creating Chores, Jobs, and Tasks

Any family will have opportunities for children of all ages to earn an allowance.  The value of the work may require a little suspension of reality to “pay” for a task, but it is worth it.  Chores can start at early ages.  A first grader may not be great at sweeping or dusting, but they can start to learn it.  These are regular chores, but special projects come up as well.  These may be washing cars, spring cleaning, days of yard work or other larger tasks.  These  projects can be used to “earn” more generous rewards.

Savings and Charity

Once you have an avenue for your children to make money, it is time to teach them how to use it.   The first thing to learn about money is how to save it and how to give it away.  Setup a percentage goal to put in savings and to give away out of each allowance.  Have your children set these amounts aside and work up to a savings account.  The charity amount can be set aside and then discuss where it might be most useful.  They may want to give to a beggar on the street, their local soup kitchen, or causes near and dear to their heart like orphanages.

When you teach a child to save and give at an early age, you are teaching them to get by on less than they have.  What if you had done the same?  These habits provide an opportunity to do things like showing the power of money earning money and how giving a little can add up to a lot.

Investing

One of the areas education has fallen short is in teaching financial skills.  Use the savings that build up to show your children how to invest.  If you don’t understand investing, then make it a family activity.  Find a website, training videos, news or money shows.  There are also great helper sites and funds to get one started in the world of investing.  A child that understands bonds, stocks, CDs (the money kind) and other forms of investment is much more likely to be able to keep what they earn later in life.  Even better, they are likely to be able to make their money work for them beyond even what someone like Dave Ramsey teaches.

This is not something you work on from the start.  Six-year-olds do not need to understand financial instruments.  However, teenagers can, and should, have at least some knowledge of how money works and how to use it.

 

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