Recently my wife and I have been weighing the idea of giving our children some sort of allowance. My wife and I had different experiences with money growing up but both our parents attempted to teach us financial skills and the value of hard work and savings. As we have been discussing the pros and cons we have considered few different critical ideas. Here I'm sharing the framework and hoping you can share your thoughts!
Any Allowance Should Be Tied to a Family Contribution
Both my wife and I agree that if the children are going to receive any money (no matter what we call it) it must be connected to some sort of contribution. This probably makes most sense as it relates to household chores or duties. I can't imagine the harm that can be caused / taught by giving children money just because, only to complain later about how the younger generation has a sense of entitlement.
Giving Children Money Allows Them to Develop Money Management Skills
Hey, lets all agree that our educational system is designed to teach the skills necessary to obtain employment and make money but it doesn't do much of anything to prepare us to manage money. The argument could be made (and my wife makes a point of bringing it up) that giving children an allowance early in life makes it easier for them to learn those important money management skills. How to save, how to budget, and how to plan.
Shouldn't Children Contribute to the Family Just Because
While yes, all allowance paid should be tied to some sort of contribution, I might argue that children should do chores and contribute to the family just because. As a family we share the sames goals and needs and so it makes sense that we would share the work among everyone.
If Children Receive Cash From Home They May Not Need A Job
I believe that my children should get jobs as early as they can. That may start with a paper route to be followed by bagging groceries or something along those lines. Yes, in high school I want my children to get used to working. If I give them allowance they may see it as a dis-incentive to get a job. This could be kept in check by limiting the allowance greatly or cutting it off when the right age is met to get a job.
What Expectations Should Be Set With Children Spending Money
One way or another it could be presumed that our children are going to get money. It could be an allowance, paycheck, or gifts from grandparents. So, along those lines it is really critical to establish some sort of guidelines or expectations. In our household we have two core guidelines. First, 10% of all income is set aside to be given to charity (in our case this is in the form of tithing to our church). Second, 50% of all income is set aside for savings to be used a future day for adult related expenses. In my mind that means college but my wife has made it very clear that we will be paying for college… alas we haven't agreed on everything yet. 🙂