Setting an allowance is a great way to teach children responsibility—as well as avoiding large impulsive purchases (we've all encountered that item in the store our child just had to have, despite an already strained budget). Though there is no standard out there in "Parent Land," there are some useful ways that you can effectively set an allowance for your child that is within your budget and theirs.
Before setting an allowance, teach your children the importance of proper budgeting and financial responsibility. Teach them the value of wants vs. needs, and then sit down to determine how they may want to spend their money. Establishing goals with your child will help you to determine an allowance that is suitable for them. Perhaps they want the newest Nintendo system—which could range in the hundreds. Explain to them that they will have to earn the total cost of a particular item over time, and come up with a schedule.
Once you determine the price of the item in question, and a reasonable amount of time to earn this total cost, you can determine what the allotted weekly allowance will be. For example, if the goal of your child costs $200 in total, and you set a time frame of 5 months, your estimated weekly allowance will be approximately $10. Now that you and your child have a goal and budget established, it's time to discuss how he or she will earn that money.
There are a variety of different chores a child can do in order to earn an allowance, and that should undoubtedly be negotiated between both of you. When we apply for a job in the real world, we are not told what we will do, but rather choose between a variety of different jobs. Your child may be very reluctant to do certain chores over others. One way to battle this issue is perhaps to assign different values to particular jobs around the house. If you really need them to take out the trash, or one week the garage is in dire need of a good cleaning, you could assign a higher value to that chore than dusting the living room. The important factor is to stay relatively close to your established budget, and perhaps every once in a while give the opportunity to make "overtime." This of course is entirely dependent on your budget constraints as a parent, and any work not accomplished or sub-par should never be reimbursed. The idea of an allowance, after all, is helping to foster responsibility within your child.
The last point I would like to make is to make sure you give your child his or her allowance every week. Withholding that money so that you can ultimately buy the goal item for your child will eliminate the learning opportunity of choosing to spend his or her money on other things. When your child asks for something else in the store, you will have to remind them that they choose how they will spend their money—and buying a smaller, unnecessary toy or candy now means they will be further from their goal. Make sure to reassess goals with them periodically to track progress and enhance the financial management experience.
Setting an allowance is a great opportunity to teach your child financial responsibility, and discussing how to structure it is a great way to hit all the key points. Enjoy this learning experience with your child and remember: practice what you preach!
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