Kids Allowance

It’s important to start teaching your kids financial responsibility at a young age. An allowance is a good way to begin to teach basic concepts like how to earn and save money and the basic concept of investing.

Not only does an allowance help kids understand the concepts above, it can also teach responsibility, counting skills, and independence.

When and if to start instituting an allowance with your child is an individual decision but here are some basic guidelines you may want to follow:

Consider Age

You don’t have to wait until your child can count or understand the concept of money. Non-monetary rewards like TV time or working toward a toy they really want can work just as well. However, they should be able to understand why and what they are working for, otherwise setting goals and rewards will be meaningless.

Start Small

A great rule of thumb is small rewards for small tasks. If the task is too big or the reward takes too long to achieve your child will lose interest. Household chores are good to start; helping Dad take out the trash or cleaning up their room can make your work easier too.

Clarify the Rules

Make it crystal clear what it takes for your child to earn their reward. Make the rules clear to avoid potential conflict and disappointment later.

Once your child has a nest egg built up, try borrowing money from them one or twice a year and pay them interest on your loan. Borrowing can teach them the basic concept of investing and returns.

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