Money Smart Kids
Making Allowances Work
Should you ask kids to do chores in return for getting a fixed amount of money?
By Janet Bodnar, Editor, Kiplinger's Personal Finance
September 15, 2005
When it comes to money, topic A for discussion between parents and children is allowance. No single allowance system works for every family. But any system will work if you follow a couple of basic rules.
First, don't start handing out money until your children are old enough to manage it, which means at least first grade. Second, keep the system simple so that you can manage it.
One of the most contentious issues is whether to ask kids to do chores in return for getting a fixed amount of money on a regular schedule. Pose this question to a group of parents and you'll find they inevitably split into two camps.
On the "yes" side are parents who don't want to hand money over to their children without getting elbow grease in return. For these parents, pay without work sounds like a free lunch. And how else would they get little Billy to make his bed?
In the "no" camp are parents who think that kids should do chores free because they're part of the family: If they make a mess, they should clean it up. If you start paying for chores, you could end up raising a gang of little mercenaries who demand "How much will I get?" every time you ask them to help unload the groceries or set the table.
Besides, some children aren't motivated by money, so cash won't coax them into taking out the trash. And a system that's linked to chores can be an administrative nightmare for Mom and Dad, who can lose track of whether little Billy has actually made his bed every day.
To help find a workable solution to the allowance-for-chores quandary, I offer a couple of alternatives.
If your main goal is to teach your kids to manage money (and, I confess, this is my preference), give them a basic allowance that isn't linked to chores but is tied to certain spending responsibilities.
For example, you might require them to pay for their own video games and CDs, movie tickets and mall excursions with their friends. It's the easiest system to manage, yet the allowance isn't just a handout; it's directly tied to financial "jobs" your kids take over from you.
Next week: A work-for-pay system that works.
This column is excerpted from Janet Bodnar's new book, Raising Money Smart Kids (Dearborn Trade, $17.95).
