So, you’re beginning to wonder about if your kids are ready to have the responsibility of an allowance. Â Can they handle having money in those greedy little hands? Â Can they wisely choose what to spend it on? Â So many decisions! Â But one question, why haven’t you been giving them one already? Â In our family Poppet has always received an allowance, from day one. Â This is how we went about it, and the reasons why we chose to give her one before she even knows it exists!
How much to give?
In our home, we decided to give Poppet $1 each month per year of age. Â So, for her first year of life, she received $1 a month. Â This year she is receiving $2 a month. Â When she is $15 she will receive $15 a month (unless inflation is crazy by then, and then we will likely revisit the amount.)
Why not have it be more as a teenager?
It is our intention that she should be holding down a part-time job in her teen-age years. Â The allowance at that point is just a little something extra, not her main source of income.
What does a 1, 2 or 5 year old learn from receiving an allowance?
A 1 year old, probably not much. Â But we handle her finances for her at this point in her life. Â As she grows we will give her allowance directly to her, and teach her how to be responsible with it.
Teach them to give back
In our home we observe the law of tithing. Â Right off the top there is a 10% cut that goes back to God. Â We take this for her and Papa submits it with our own tithe to the Church. Â There is also a portion that is set aside for special offerings above and beyond the tithe. Â This is an optional amount that we contribute for her at this point. Â If you are not religious, you can teach your children to give a bit to charity.
Next, we want her to learn to give to others. Â A certain amount of her allowance may go towards an item that she can share with her cousin – a candy, a game, etc. Â (we chip in the difference since a buck doesn’t go too far these days!)
Teach them to save
The remainder of her allowance is put into the bank for her to have access to later. Â If there is something special she would enjoy having (i.e. a stuffed animal) it comes out of this account. Â As she grows she will have different jars in her room. Â One will be for tithe, one for saving and one for spending. Â She will put at least 50% of the remaining allowance into savings, and the other 50% can be spent.
Let them make their own choices
Within reason, we will let Poppet spend her allowance that is not saved on anything she wants. Â She may choose to save it up for something truly special she would like, or she may decide to blow it all the first day and have to wait an entire week for more. Â We will guide her steps, and have definite input in what she spends it on, but if she chooses to use it all in the same day and we agree on what it is going towards, it is her money and her decision. Â Through this (with our help) she will learn that living “pay cheque to pay cheque” is not nearly as rewarding as budgeting her money across the entire week.
Make sure their education is provided for
We use Poppet’s baby bonus for her future education. Â It is money we didn’t have before she arrived, and so we don’t miss its presence. Â Each month it goes directly into an RESP for her. Â Even if she does not go on to post secondary education, the funds can still be liquidate by simply paying for the tax on it. Â Either way, it is a great way to ensure savings! Â If your child does decide to carry on their education, then there will be some funds available to them.
When I went to University, my parents had a deal with me: Â Â I would pre-pay my education by working and a small student loan, and I would be reimbursed for every grade above 75%. Â (I think I forgot to collect on this though!) Â The only problem with this was, it was extremely difficult to live in a different city, paying my own bills for the first time, as well as trying to receive an education. Â This meant working full-time as well as attending school full-time. Â I was exhausted by the end of my second year, and when I met and married my husband I never did complete my 3rd year. Â It would be great if Poppet could have a bit of a head start when it came to her education so she could focus on the exact purpose of why she was there in the first place! Â This is not to say that we would foot the bill for her education. Â Actually, it is our saving of her baby bonus money that will allow her to perhaps only have to work part-time through her post-secondary education.
The bottom line
Giving your child an allowance isn’t just about what they do with it today. Â It can teach them so many money management skills that they will need in order to have an easier time of it as an adult. Â What we teach them today, can, and likely will affect their family finances and that of their own children in the years ahead.
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