Allowances: What Are They For? Are They Good or Bad for Kids? Family Finance Picks #58

This week’s picks are all about allowances. What are they for? Do allowances make your kids lazy, dependent, and entitled? Or, do they teach your kids good money habits?

Read on...

What’s an Allowance For?

by KJ Dell’Antonia on Motherlode — The New York Times Parenting Blog

What purchases should an allowance be used for? That’s the question KJ tackles this week with her readers on this Motherload blog post.

My 2 cents:

I like KJ’s characterization: an allowance is a “very tiny piece of the family budget to manage.” I also think that tiny piece (i.e., the categories) should expand over time as the child matures. Modest pocket money for small discretionary wants (toys, munchies, etc) for youngsters is a fine start. Kids learn to delay gratification, make trade-off decisions, and generally appreciate that money isn’t a magical infinite resource. Clothing, entertainment, sporting expenses are all great categories to add as kids grow into the tween/teen phases — not to mention long term savings and philanthropy. Also, kids can start contributing their own income to those budget categories as they get old enough to earn outside-the-family money from odd jobs, summer jobs, mini-businesses, etc. Whether the allowance income that comes from you the parent is tied to chores or not — well, that’s a whole ’nother raging debate!

If more parents thought “budget” or “constraint” when they heard “allowance,” it would be less of a dirty word!

Related FamZoo Activity: Teach your child how to make and manage a budget.
Discuss on FaceBook.

If You Love Your Children, Don’t Give Them Allowances

a letter from Lawrence Chrietzberg on TCPalm

Do you love your children? Then don’t give them an allowance! Or so argues Lawrence Chrietzberg in this letter to a Florida newspaper.

While I think some of the points are fair, I think there are quite a few flaws and leaps in Lawrence’s letter. How about you? I think age is an important consideration. I also don’t think allowance has to mean entitlement. If used properly, it can be an excellent tool for teaching personal finance basics. For example, how about taking one of those necessities that Lawrence describes his father taking care of (like clothing), making a budget for it, setting an allowance to that budget, and handing over the spending decisions to the child? That wouldn’t be a hand-out teaching “laziness” and “dependency” — more like a personal finance education teaching constraints and discipline.

Related FamZoo Activity: Teach your teen how to make a clothing budget.
Discuss on FaceBook.

Giving Your Kids an Allowance Can Save You Money in the Long Run

by Katherine Snow Smith on Tampa Bay Times

Allowance? Earned through chores? Which chores? How much? How often? Interesting questions, but they may not be terribly crucial. The most important thing is that kids have some form of modest income from somewhere — some money to call their own with which they can make regular spending decisions (and mistakes!). Kids will learn to spend more wisely if we let them practice spending their own limited supply, not yours which in your kid’s eyes is boundless.

I always think real family stories illustrate this point most effectively. Katherine’s personal stories at the end of this article are a perfect example. Read them here.

Related FamZoo Activity: Teach your child to save up for a purchase.
Discuss on FaceBook.

Still can’t get enough of the allowance debate? Join this lively allowance discussion on BabyCenter — 93 comments so far!

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit our ever growing list of family finance bookmarks here. We’re up to 2,900 now!