Dear Aunty Aidan,
In 2021 we’re considering giving an allowance to our elementary-aged child. What’s the bottom line?
Counting on You
A child of the Second Plane (6-12 yrs old) has a thirst to understand the complex interconnectedness of all peoples and where they themselves might ultimately make a contribution. They want to feel part of the family processes and are now old enough to begin to receive a small share in the household funds. Most experts recommend that a child be given an allowance equal to the number of years they are old - $6 for a six year old – how regular a basis is up to each individual family. It is agreed that this “income” should be linked to responsibilities around the house but not necessarily to those that are already required like washing one’s hair or feeding the dog. Remember it is an “allowance” - an amount they are allowed to have because their contributions are valued, even monetarily.
Here comes the teaching moment(s): how to manage that money. One recommended formula is a third to spend, a third to save, and a third to donate. Permit your child to use the spending money as they please and to learn from their own mistakes. Don’t lend them money. Model good practices like delaying gratification (“I really want a new pair of shoes but shouldn’t use that credit card”) and try to be more conservative about over-spending on entertainment (“We’ll have dinner in tonight and not pick up take out”). Take your child to your bank or go online to open a savings account or you be your child's bank and hold the savings for a length of time like a CD. Talk about which charities speak to their heart and decide how to send the donation.
Want more tips? Read How to Raise Financially Confident Kids by Mary Hunt. Then maybe you can count on your child being well-equipped to deal with any fiscal cliffs - ah, that’s the bottom line.