Allowances for Children

           Giving kids a weekly allowance helps to develop responsibility and independence.  Children who receive regular, scheduled allowances learn to save and plan ahead financially.  However, making the decision about whether to give a child allowance can be difficult and there are several things to consider. 

            First, if possible, start giving allowance as soon as the child recognizes the money’s worth.  This is usually fairly early on, but you don’t want to give it to them before they can understand and manage their money.  You won’t want to make the system too difficult for you or the child.

            Second, decide on an amount and schedule for the allowance.  You should give children enough money that they can spend it as they wish, but not so much that you’ll be upset if it is squandered.  You can consult other parents to gauge an amount, but go with your instincts about what is appropriate for your family.  Keep in mind that it is reasonable to increase the allowance as children get older; this enables them to slowly begin to contribute to their expenses, put some money in a savings, and even enjoy some of their money.  As for a schedule, younger children do best with weekly allowances.  As they get older, it can be more beneficial to switch to a monthly schedule to encourage budgeting and forethought. 

            Third, it is reasonable, and even helpful, to require children to save a certain percentage of their allowance.  For younger kids, it helps to make saving fun and tangible.  You could get them a fun piggy bank that they can watch fill up.  As they get older, begin to explain to them how savings accounts and interest work.

            Lastly, one of the most difficult decisions surrounding giving an allowance is whether or not it should be given as a reward for something such as chores or good behavior.  The general feeling among child development experts is that this can confuse the issue with children, so allowances are usually better off being separate.  Along those lines, docking a child’s allowance as punishment is not good either.  They should learn consequences in more appropriate ways and make the discipline fit the misdeed according to experts.

            Over all, allowances are a means to educate children about money and savings.  They work best when the agreement is clearly understood by both the parents and the children.  The most important thing is to communicate with the child about finances to help them learn money management skills.

            Horizon CCU can help you develop children’s good saving habits with our Kids Club accounts.  We have basic savings accounts and youth CDs.  With HCCU’s Kids Club, children under twelve are automatically enrolled and will receive a FREE piggy bank when the account is opened, a birthday card each year on their birthday, and a prize out of our treasure chest for each deposit of $5.00 or more.  They can also access our website information targeted to help children learn about finances and savings.  These perks add some extra incentive for children to save money!  For more information, contact us or apply for membership.