Six out of 10 parents give their children an allowance. If you choose to do the same, the next question is, how much? The answer will depend in large part on your child’s age, ability to handle money, and your financial situation. Here are four ways you can figure it out.
1. Set Allowance by Formula
Some people suggest giving a child 50 cents for each year of age. By this method, a 7-year-old would get $3.50 per week. Others suggest a dollar per year, in which case a 7-year-old would receive $7.
2. Set Allowance by Budget
You might consider how much you spend on your child to determine the amount of the allowance. "Look at the space of a week and how much you spend on miscellaneous things your child wants or needs," suggests James Sears, MD, a pediatrician in Southern California. This method takes into account your child’s needs as well as what you can afford, as long as you are currently spending within your budget.
This approach gives you a ready response when your child asks for a toy or piece of candy. "If they don’t have any money, if it’s already spent, they know they can’t get what they want," says Sears. It might take a few excursions for the message to get through, however, so be sure to stick with the plan.
3. Let Your Child Suggest the Allowance
You could start by asking your child what amount works for her. "Let your kids make a proposal about what they want to spend money on and submit it to you," suggests parenting expert Jim Fay, author of Millionaire Babies or Bankrupt Brats: Love and Logic Solutions to Teaching Kids About Money. Use your child’s proposal to determine what purchases match your values and what amount fits your budget.
"The key is, there should never be enough allowance for children to have everything they want," says Fay. "That prepares them for the real world of adults."
4. Pay Allowance for Chores