I’ve been talking to a lot of parents lately about allowances. It’s not an easy subject, but as the economy contracts, having an allowance may actually be a benefit as kids start to learn the value of money.
Let’s start with some basics. Before age 8, kids really have a hard time grasping the concept of money. At about that age, perhaps a little earlier, they begin to understand relative value. So, while a 6 year old might not know the difference between a trip to McDonald’s and a trip to Disney world when it comes to Mom and Dad’s wallet, older kids do.
In the recent more affluent times, parents said that they were more likely to buy kids what they needed and wanted, and they’ve forestalled belt-tightening as long as possible. For many that time has come, and it may come for many more in the near future.
Remember, that whether your instituting an allowance for the first time or otherwise shifting the dynamics of spending in your household, this represents a change, so it’s important to discuss it—at the level your kids understand.
There’s nothing wrong, for instance, in saying, “I can’t afford that.” My parents were kids in the Great Depression, and it set them up for a lifetime of living within their means, and they have never been uncomfortable. They come from a generation when living within one’s means was a virtue and not a penance, and if you couldn’t afford it, the question wasn’t: “How can I get it?” but “Do I really need it?” More often than not, the answer was “not at all.”
So, what an allowance does is help your child understand on a personal level the value of money. You can set what is the appropriate amount based on what your child is normally spending, and it’s probably going to go up as a child reaches teenage years.
The advantage is that kids learn to make informed choices, evaluate and prioritize. A 14-year-old, with, say, $25 a week simply can’t afford to do everything. It’s time to think whether or not the movie evening is more important than buying a new item of clothing, etc. These are great choices for kids to be making as they’re young because it has the potential to set up a habit of consideration that will stand them in good stead in the future.
And, as parents, when we stop paying for everything that kids want, we’re not denying kids things, we’re giving them the opportunity to make choices and setting up a consequence of making those choices. That’s real life, kids.
This also teaches another very important lesson—that happiness isn’t dependent on “having.” If you can’t have something, especially something that’s discretionary, it’s amazing how quickly kids forget what they “had to have.” They begin to develop a sense of value and an understanding that having something at the expense of something else means that they’ve made a grown-up choice—and choices can be difficult and disappointing. But that’s life at times. Better kids should learn how to deal with this when they’re young and still under your care.
When we talk to parents about what they wish their parents had taught them, so often we hear, “I don’t know anything about money. I wish my parents had been better about that.” We see kids who run rampant with their first credit cards, and that also leads to all kinds of problems.
Money, ultimately, is a tool. You wouldn’t send your kids out with a chainsaw without making sure they knew how to use it effectively and safely. Money is the same. Learning to manage an allowance is the first step to using that tool that they’ll need throughout their lives.