Allowances for Kids
To give or not to give an allowance, that is the question (and sometimes a controversial question at that). As piggy banks become obsolete and the need for physical cash dwindles in today’s fast-paced society, one thing hasn’t changed: the call of a child saying, “Hey Mom, I need money.”
According to a T. Rowe Price survey, 51% of parents give their kids allowance and 54% of parents who give allowance firmly believe it should be earned. This is a controversial topic of allowance and kids, divided by the 2 camps. Here are some thoughts to consider if you are looking into giving an allowance.
What age is the best to start handing over money?
There are no hard and fast rules when it is a great time to start with an allowance. Is your child constantly asking you for little things (or Large things) all the time when going to the store? This may be a great time to introduce an allowance to them. At this stage, they are old enough to understand the desire to want something.
How an allowance can lead to smart financial habits?
By having an allowance, your child/ren now has the resources to make their own decisions. Do they buy that candy today for $1 or wait to get the new toy that is coming out? They can decide whether being patient and saving is something that they want to do or not? One of the biggest issues in today's economy is that 40 percent of U.S. adults don't have enough savings to cover a mere $400 emergency.
How much should parents pay kids and should it be earned?
This is not a right or wrong question, and it has various considerations. What is the child's age, responsibilities, and capabilities? What are they going to be using their allowance to purchase?
What should the allowance be set for?
This is something that should be set out in the beginning. Your kids should know what they are expected to pay for with their allowance, and the things that the parents will cover to ensure that they have what is needed,
An Allowance can teach empathy
By giving the child the funds and budget to buy gifts, contribute to causes, they get to see the impact that their financial decisions. Seeing the smile on the sibling's face because of their generosity can build a willingness to give to others.
The median savings account balance of $4,830, we can conclude that most Americans wouldn't have enough money in the bank to cover a single month's worth of expenses. And that's a problem. The real question is why do they not feel it necessary to save?