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Making Allowances


Learning to Manage Money at a Young Age by Sharon Lechter


Instituting an allowance plan that works best for each child is a sound way to start teaching the value of money, budgeting and saving.


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y the time a child is 5 or 6, he or she should be able to understand how an allowance works and the reasons for receiving it. When deciding to pay a child an allowance, the family should first talk together about how he or she will be using the money. Is the plan to save it or spend it?


Will a parent need to approve any purchases? Learning to consistently put away a portion in a savings account and perhaps gift another portion to charity become valuable life lessons. Many parents adopt the “three piggy bank” method to teach these lessons. My 20 years of experience work- ing with parents and teens has shaped a practical framework of four proven strategies to help a family wisely com- municate this mutual commitment and set parameters, including a policy as to the amount and frequency of payment. Allowance decisions can differ from one child to the next in the same family.


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Personal responsibility: There should be no financial reward for things that children need to do for their own health and development, such as re- sponsibly heading to bed on time after brushing their teeth. One father shared that he had to pay his son to brush his teeth every morning and night, so who was in charge? Family or social responsibility:


Tasks that contribute to the family or social environment should not result in financial reward, such as washing the dishes or reading to a younger sibling. One mother, after explaining the plan to her children and consistently applying it, saw their attitude transform in just a couple of weeks. Instead of fighting, the three kids now work together each night to clean up after dinner without arguing. Paying for completion of specific


tasks: Determine and agree to guide- lines that include the general tasks or


duties that are expected, the perfor- mance of which will result in earning the specified allowance. By defining what is over and above personal, family or social responsibility, parents encourage and reward children for their extra efforts. Those same kids agreeably cleaning up after meals may also be thinking of extra chores around the house to earn their allowances. Encouraging a child’s entrepre-


neurial spirit: Inspire children to think of creative ways to earn money and watch in pleased amazement at how creative they become when they really want something. One 12-year-old now has a business collecting cans from all of his neighbors and is earning $100 every other week. He was able to buy the faster skateboard he wanted and even justified it as a business expense, because he could collect the cans more quickly with it.


Providing structure and enabling


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