Best Practices for Distributing an Allowance to Your Child
Giving your child an allowance should be more than just paying him or her a small salary for being your child. It is an earned income – a reward for their ability to perform tasks around the house. However, it can do so much more than teach a child the possibility of a monetary reward for work. It can also open up a world of understanding saving and budgeting. While it is up to you to determine how much and for what an allowance is distributed, here are a few suggested best practices to consider.
Reward for Effort
The purpose of an allowance is to show your child the value of hard work. Establish a standard amount of work they need to do in order to earn their allowance and consider paying extra when they go above and beyond. This will help them learn that as long as they put in the work, they will be rewarded for it.
Pay Based on Age
Start the allowance rate based on age and the cost of items they may need or want. A five-year-old doesn’t need a $20 weekly allowance because a new toy, treat or pack of baseball cards doesn’t cost that much. Build up the kind of chores required (such as making his or her bed) and what you pay as your child grows older.
Reward Your Child for Saving
Offer to give your child more money if they save it. For example, give them $5 at the end of the week that they are free to spend right now, or offer them $7 if they put it in their savings account at Clark County Credit Union. A savings account will help educate them on the benefits of using a credit union, but the entire purpose is to help your child learn the importance of saving money.
It's More About the Money Decision
Yes, the amount of money you give your child is important, and you'll need to decide this. However, the most important lessons your child can learn after opening their savings account is how to use their money wisely and how to save it. This is the ultimate lesson your child needs to take from an allowance.
Paying your child an allowance has the possibility of being so much more than just handing over a few bucks every week or two. It has the potential of educating your child on the benefits of budgeting and saving. This can go a long way in establishing a concrete understanding of how to best grow a savings account and how to prepare for their financial future. All it takes is following these tips and suggestions for the best practices of giving your child an allowance.
For information about opening a savings account or other financial tips and tricks for your child, contact us at 702-228-2228, option 1.