When I was a kid, I received an allowance for doing household chores. Now, many parents use an allowance to teach kids about budgeting, deferred gratification, trade-offs, and even charity. Many start with a modest amount and then increase the allowance as their children grow and gain more responsibility.
Here are some of the important financial lessons you can teach your kids when you pay an allowance:
- There are opportunity costs. When a child has some money of their own, they get to make decisions about how to spend it, and they’ll begin to learn that they don’t have money for everything that may catch their eye.
- Allowances teach discipline. If there is something big that your child wants – like a bike or concert tickets – they will have to set some money aside regularly to save up.
- Even a small budget has room for charitable giving. Be sure to remind your child to designate some of their money for a cause they care about.
The real payoff of this approach to allowance is this: kids who grow up with an appreciation for money and budgeting learn to be more responsible with their money as adults —and that lesson is priceless.
The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.