We started giving our children an allowance about 3 years ago. Before that, we bought a few toys here, and a few video games there. After we set out on our journey to pursue financial independence, I realized that I wanted to equip our children with the same money management skills that we had learned years into adulthood. How do we teach our children how to manage money? We give them money to manage. Here are 5 reasons why you should consider giving your children an allowance.
1.) It teaches responsibility
Both of our kids each have daily chores. We pay them each $20 every two weeks. Just like a job, if they do not complete their chores, they lose money.
2.) It teaches them to save
Both of our kids have their own checking and savings account. On payday, they each contribute 20% of their allowance to their savings account, and put the rest into their checking account. They also do this with birthday money, Christmas money, or any other money that they receive. Anything that is not a necessity such as clothing, food, or educational expenses, they must pay for. This has included tablets, cell phones, a PS Vita, a compound bow, Disney World tickets, and gifts for birthday parties they attend. Yes, we require our children to buy their friends’ presents with their own money. No money in the bank? No birthday party. This forces them to always keep money in their checking account.
3.) They experience buyer’s remorse
My kids no longer waste money on useless souvenirs, or random toys. They have learned the feeling of buyers’ remorse at an early age. On our first vacation since we had started giving our kids an allowance, our daughter had spent her money on a dinosaur hat. When we returned, she never wore it. She was so upset for wasting all of her money, that she vowed she would never do it again. Now, she collects pins and pressed pennies from our journeys.
4.) They learn the value of money
Here’s the best part, my kids really take care of their high-valued items. They purchase cases and screen protectors, because they know how hard it was to save that kind of money. They do not leave their tablets in carts. They do not walk off and leave their phone on a table. When they are spending their own money, they will take care of their things a lot better than if you had just bought it for them. They learn the value of a dollar.
5.) They learn to delay instant gratification
My children shop around, or wait until an item goes on sale. They have no problem waiting to find a good deal, or walking away from something they want to think about it a little longer. They have become very mindful of their spending, and they do not make impulsive purchases often. One perfect example is that my son wanted a Chewbacca backpack he saw at Disney World. He checked Amazon, and was able to find the exact same one for over 50% off. He ordered it, and it arrived once we returned home. He was happy about finding an awesome deal, and he learned to delay instant gratification to save money.
Some may argue that children don’t need an allowance, but I would argue that they do. How many adults could have benefited from these financial lessons at an early age? Do your kids a favor, teach them how to handle money wisely. Teach them how to save. Let them make mistakes with just $20 instead of $40,000. They’ll thank you later.