College Admissions Consulting The New Approach to Allowances Written by Aimée Yorsaneron October 23rd, 2024 Before I joined the college finance team at College Coach, I was the associate director of financial aid at Babson College. Prior to my stint with Babson, I worked as an assistant director of financial aid at Berklee College of Music, MIT, and Boston University. I've spent most of my professional career working in financial aid and have assisted traditional undergraduates, adult learners, and master’s degree students in financing their educations. I have a master’s degree in human resource education, a bachelor’s degree in business administration, and a certificate in coaching. Learn More About Aimée financial literacy, financial planning, parenting, I have two daughters, one in kindergarten and one in third grade, and I’ve been thinking about allowances. Growing up, my siblings and I got an allowance for doing chores. Our refrigerator sported a chore chart that my sister and I consulted, and we checked off each of our tasks as we completed them. Our mother was the chore supervisor, and we received our allowances based on a job well done. These days, many experts suggest giving children an allowance that is not based on chores. Try thinking about it this way: chores are simply tasks that are necessary for all members of the household, and everyone should be expected to pitch in, regardless of personal reward. The risk of giving an allowance for chores is that your children may try and work the system: if they don't want to do the chore, they may be just fine not getting paid. Instead of treating allowance as a reward for pitching in as a member of a shared household, think of allowance instead as a tool to teach young people financial skills, as well as a way to start positive family discussions about money. Scholastic.com indicates that, by the time a student graduates from college, they will have amassed more than $5,000 in credit card debt. The sooner a child is introduced to financial concepts, such as the value of money and wants versus needs, the better. How often should I give an allowance? In many allowance-practicing families, parents/guardians give funds to a child on a weekly, bi-weekly, or monthly basis, with the understanding the money can be used for spending, saving, and charitable giving. How much is a typical allowance? Most experts agree the average allowance rate should be $1-2 each week, per year of your child's age. For example, a four-year-old receives $4 a week, a five-year-old receives $5, and so on. Greenlight has a great article listing average allowances by age. Consider making your child responsible for more of their wants as they get older and their allowance increases. How can I teach my child how to save and spend wisely? Once your children have money in their pockets, you’ll want to teach them how to budget for spending, the concept of saving and, if it aligns with your family’s values, charitable giving. Here are some ideas: Take your children to the local bank on allowance day and have them deposit an agreed upon amount. They can then update their passbook with the deposit amount and verify it against the monthly statement, adding interest when it accrues. Consider encouraging them to save for a big purchase, like a bike or gaming system, or as spending money for an upcoming family vacation. If your children will be giving to charity, help them choose an organization that has meaning to them. There are plenty of creative ways to talk about money skills without actually using money. Games like Monopoly, The Game of Life, and PayDay are a great way to accomplish this and have fun at the same time! As you begin this journey, do what makes the most sense for your family, your budget, and your lifestyle. Think about the skills you are trying to teach your children as you develop your plan, and keep in mind that consistency is the most important part of this process. Work with our college finance experts to help you determine the best way to pay for college. Find Out More Related Resources Read | Posted on December 4th, 2024 Best Gifts for the Student in Your Life Read | Posted on November 26th, 2024 What Are the Different Types of Architecture Programs? Read | Posted on November 22nd, 2024 Top 7 Reasons to Use College Coaching
