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"Children who receive harshly stingy allowances. have no reason to think long-term. They see no point in saving, or in comparing possible purchases, because they know that their incomes are too meager ever to accumulate into anything significant." In other words, allowance should be an amount that encourages both short-term spending and long-range savings for the "big ticket" items.
Set a consistent "pay day".
Set up a system where you are sure to pay the child at the same time on the same day. This avoids the constant "You never paid me last week!" whine
we so often hear. Paul W. Lermitte, author of ‘Making Allowances: a Dollars-and-Sense Guide to Teaching Kids about Money’, suggests keeping an "allowance tracker", a written record of the allowance you have given out to each child. Another writer keeps track of allowances on a computer program. Still another hands out "allowance coupons" at the time of payment, redeemable for cash. Finally, one expert uses a "checkbook" system in which she credits her kids' "accounts" with a monthly allowance; the kids write her a check as they need cash. Do what works for you, remembering consistency is the key.
Don't tie allowance to work.
All the experts agree: Doing chores around the house is a regular family obligation, and should not be tied to allowance. "An allowance is given to a child on a regular, consistent basis. In simple terms, a child should receive his allowance for simply being a member of the family, in order to instill good money management skills," says Paul Lermitte. On the other hand, parents may still choose to give extra payment for doing certain out-of-the-ordinary jobs, such as painting the fence or cleaning the garage.
Don't pay for good grades or good deeds.
"Buying grades, or any other good behavior, distracts kids from the sense of accomplishment that should be their real reward," says Janet Bodnar. Keep money and good works separate.
Encourage children to save.
Some of the experts suggest requiring the child to set aside a certain percentage of his/her income for savings. Others believe that savings should be voluntary. If children understand clearly that they are now responsible for purchasing that latest electronic gizmo, or the trendiest new fashion item, they will be forced to learn to save on their own. In either case, the money saved can be stored in a special jar or piggy bank; it is not necessary to put the savings into a bank. Bodnar tells us, "Among younger children, banks conjure up a place that takes your money but doesn't give it back, so savings is best begun at home, where kids can keep an eye on their money and watch it grow." If you do decide to have your children put their savings in a bank, let them know that this is their money, which is accessible to them, although you might want to have an agreed-upon minimum that must stay in the bank before they can make a withdrawal. If you don't put their savings in the bank, but would like to teach children about earning interest, consider providing a small amount of interest yourself, based on the amount of money and the length of time the child saves it.
Thanks to these money experts, I have a new financial plan. Each of my children will be paid consistently, fairly, and generously, and this payment will not be based upon chores or good grades. We'll discuss ahead of time the things for which they are now financially responsible. We'll purchase a special piggy bank for each of them so that they can start saving for more expensive items. My daughter will see that all the money she has been hording can be transformed into something she has always wanted, something that her parents have been unwilling to buy for her. My son will see that instead of spending the money as soon as he sees it, he might want to hold on to it for a bigger goal. And if he decides to throw his money away on yet another "piece of junk", his mother can stay relaxed. It is his money, after all. It's all part of learning to be a responsible money manager.
I feel better already.
