Financial skills let kids understand how that world works and that earning a living comes from hard work. Giving Allowances creates an opportunity for parents to teach their kids about a lot, including working for a living, money management savings, etc.
Educating your kids and letting them get financial skills such as money management has no specific time; therefore, you can start as soon as possible.
Such good exposure to financial skills at an early point in life lays the foundation of a successful financial future and career in disciplines that are finance inclined and ultimately in life.
By teaching financial skills, you can also get great experiences out of a dull moment.
While there are so many financial skills to learn, some of the basics that you should teach your kid through giving Allowances to the different age groups include the following;
Financial Skills to Teach Ages 5-6
While giving allowances to this entry age group, you should teach the basics of money such as;
- The differences between the value and appearance of different bills and coins.
- The idea of putting money aside to meet needs later.
- The value of working to earn money.
- Knowing the difference between their needs and wants.
Financial Skills to Teach Ages 7–12
After getting the very basics, when your kid gets to this age group, you should introduce them to some concept of finance that will help them develop financial skills, such as;
- Money management, the idea of having savings and allowance spending.
- How to track their purchases.
- How they could overcome impulse buying.
- Shopping around to compare prices.
- Budgeting. (how to make and stick to them)
Financial Skills to Teach Ages 13–17
At this stage, you could have your teen kid practice the financial skills you have been teaching them. At this point, you open up the complex financial concepts and teach them harder skills. These other skills include,
- How to make both short and long term financial goals.
- Managing debt.
- Protecting their selves against financial identity theft.
- The use of online financial services and tools
- Saving towards a specific goal.
- Understanding the wise use of credit.
- How to manage money earned through work such as a side hustle or summer jobs for Teens.
Pros & Cons of Chores in Exchange for an Allowance
Giving your kids allowance is a great way to give them financial education and help them sort out their immediate needs independently. It is best not to use your kids’ allowance as a form of earning or payment for the chores they do.
Chores are a way of them helping out in the house. It would help if you didn’t give or make your kid think that the allowance is their compensation for their chores. Instead, make them understand it is a responsibility.
Even though using the allowance as payment for chores or good behavior might get some good results initially. Eventually, it may lead to some bad experiences and impacts.
To understand its impacts, we list here the pros and cons of using the allowance as payment or earning from doing chores.
- Earning allowance as payment for chores will act as an incentive to get the kids to do their chores without question.
- It teaches the kids hard work and that they gave work hard to earn money.
- They will get to understand the relationship between work and play.
- Your kids may also think up ways of working smarter and faster to earn more money, thereby becoming more creative.
- They will not have a sense of entitlement; they will understand that they will have to work to earn.
- They also spend money wisely as they will associate the money with all the time they put in to earn it.
- Your kids doing chores for money will teach them that working isn’t always fun.
- They will begin to be open to requests for everything they will do in the house.
- Your kids may and will eventually decide not to do chores will they don’t need the allowance or when they think they have enough savings.
- Earning allowance for chores Betrays the idea of financial education, and your kids will get to learn no financial skills.
- It undermines the idea of working together as a family and having some family time.
There are different reasons for giving allowances to your kids, and in this article, we have listed them out, including the various recommended weekly Allowance s for different age groups.
We have also suggested that you create a scenario where your allowance to your kid is seen as a reward for the chores done.
As a last tip, we suggest that you use other opportunities that involve money, such as bill payment, to teach your kid financial skills, and in the future, you will be happy you did.
Benjamin is a certified financial advisor, with over 10 years of experience in the industry. He is knowledgeable about various business and financial topics, such as retirement planning and investment management. Ben has been recognized for his work in the financial planning industry. He has also been featured in various publications.