Giving a small amount of money regularly to children as an allowance can be a fun way to teach them about fiscal responsibility. But there a few do’s and don’t you need to follow to ensure that the lessons are well learnt.

As children, many of us may have heard from our parents upon hearing our annoyingly persistent request to buy something we want: "When you grow up, you can buy that with your own money."But that concept is slowly changing. Parents nowadays are beginning to give children a small amount of money regularly and the freedom to buy whatever they want with that.

Giving allowances to children has been a part of the Western culture. It is however a new concept in Nepal, one that is slowly becoming more popular. Parents who are considering allowances are often surrounded by questions such as why, how much, and how often? But the first question we need to ask is: is it even necessary to give allowances to our children?

 

It is for this very reason that parents approach the topic with a mixture of fear and trepidation. To some, it is the quintessential way to teach children financial literacy as well as develop character traits such as patience, thrift and generosity. To others, however, allowances are nothing more than dangerous indulgences that take away parental power and authority, and teach children  nothing more than greed.

The three most popular approaches.According to Ron Lieber, a personal finance writer for the New York Times, there are three basic ways that parents approach this question.

 

No chores necessary. Children are simply given money (usually weekly) and are either free to do what they want with it, or need to allocate a certain portion of in specific ways. 

No allowance at all. Here children are not given allowance at all, but are taught to take a “communal sharing” approach. The idea here is that we are all part of the same family, and we should all contribute what we can to the common good, cheerfully pitching in to do chores simply because the family needs them done.

No free money. This popular choice is to link allowance to the performance of chores. It means that the size of their allowance is directly proportional to their willingness to work hard. The more they work, the more they receive.

 

Of course, whether or not to give children an allowance is a personal choice for each family. But if you have room in your household budget, giving your kids a weekly or monthly allowance can be a powerful teaching tool. They are a child’s first exposure to the power of personal choices that financial means can bring.  Here are some tips to help you if you are thinking of giving allowances to your children. 

Have a plan

Think through your allowance strategy before approaching your children with an offer. That is you need to be clear on these questions. Why are you giving them an allowance? How much? How often?  And what expenses are your kids expected to cover with their cash — for example, video games, toys etc. Have all the angles figured out before you sit down with your children, because they’re sure to ask every question imaginable (and probably a few more!). 

How young is too young?

Some child psychologists and educators say that children as young as three or four can benefit from a (very simple, very understandable) weekly allowance. Others say to hold off until they’re at least eight or nine of age. It depends on the individual child’s personality. The point is to start financial literacy for your children as soon as they begin to show interest in it.

Money talks

Once you’ve worked out the details, thoroughly explain the plan to your kids: the rules, the whys, the what-ifs. You may even want to write their commitment down, sign the paper together, and post it on the fridge, so everyone is on the same page on how they’re getting, when they’re getting it, and what it’s for. 

The three S’s: Spending, saving, sharing

When establishing an allowance, get your children to buy into the concept of: spending only a part of their cash, saving a greater part for a larger purchase or purpose in the future and sharing a bit as well — by donating to a local charity, their school, or another worthwhile cause. This is an excellent way to expose them to the three most important things they can do with their money – spending, saving, and sharing – and it’s a lesson that can last a lifetime.

Show them the money

It’s tough to remember and easy to shrug off, but don’t flake on your kids’ allowance. One of the most powerful learning aspects comes from consistency: the regular, expected arrival of funds, on time and every week. It helps to choose a specific time to hand over the money — say every Saturday morning, every Wednesday morning. And hand over the cash without whining or being reminded. It will pay off in more ways than one. 

Don’t deny their dues

No matter how tempting, don’t withhold allowance as punishment for bad behavior or poor grades. The whole monetary arrangement is supposed to develop greater trust and better communication and cooperation. So using it as an unexpected disciplinary tool will just make you look cruel in the eyes of your children.