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Starting Young: Using an Allowance To Teach Money Management

Giving kids an allowance can be controversial. There are parents who believe that paying your kids to do normal and expected chores can lead to entitlement and too much external motivation. While I understand that belief, I believe that giving allowance to your kids can be very beneficial for teaching them how to earn money and how to responsibly spend it.

Starting Young: Using an Allowance To Teach Money ManagementOur allowance journey began last January.

Last January, as we rang in the new year, my husband and I decided we were going to start giving our 3 1/2-year-old daughter an allowance. We were already starting to give her daily chores and she was expected to keep her room clean at that point, so we felt like the timing was appropriate.

When I was researching how to do allowance with kids, the general “rule of thumb” was that you should give your child $1 per week for each year they are of age. So since she was 3, we went with $3.00 per week.

In order to get her allowance, my three-year-old had to do three things:

  1. She had to make sure her room and play space were cleaned up each night before she went to bed.
  2. She had to be a good helper and help Mom and Dad when we asked for her help.
  3. She had to be kind and a good friend.

On Sunday nights, we would sit down and give her her allowance.

We made sure to not just give her the cash and make it insignificant. We would talk about the week and reflect on her behavior. We would ask her to tell us what she thought she did a really good job on and if there was anything that she could work on for next week. Being 3, her answers were pretty limited, but we really noticed how reflecting on her own behavior helped her understand how her actions make others feel. We would also tell her examples of things she did that week that we noticed.

Allowance was never brought up by her during her week. She never did something in order to get it and we never threatened her with not getting it for not doing it. It was simply something that made Sunday nights a time for reflection.

Giving our daughter allowance has been full of teachable moments.

In addition to the positive behavior and reflection aspect that allowance gave to us this last year, she is learning about money. This last year she learned how to count money. We gave her combinations of change and dollar bills and she helped us count it all up to equal $3.00.

The biggest payoff, though, came at the end of the year. We wanted to make the money that she earned into a teachable experience about money management. She emptied out her piggy bank and we counted her money. We split her money into three piles: Savings, Spending, and Giving. We put a third of her money in each pile. We took her to the bank and she was excited to see her Savings pile get put into a savings account that she could use later in life when she needs it. She was excited to use her spending pile to buy herself a doll and some accessories at Target. And what made her the happiest is how excited she was to choose to give her Giving pile to the Salvation Army by putting it in the red bucket outside of Hy-Vee.

I am a firm believer that allowance doesn’t have to be used as a motivator for kids to do what they’re supposed to be doing, but that it can be used as a way to teach our kids what working hard and caring about others can give you.

For us, it was a great experience and we will be continuing it each year!

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