Allowance Guidelines For Children

Teach Your Child To Manage Money Wisely

by Catherine Anaya

My daughter doesn't ask for much. She's very practical. This past Christmas she asked Santa for a new suitcase and a special silver bell. Still, every now and again she'll surprise me with a request for something impractical and commercial. Once when I told her I didn't have the money for it, she replied quite frankly, "You don't need money. Just write a check!" Obviously our brief trial of allowance for chores around the house didn't accomplish much in the 'money doesn't grow on trees' lesson we thought we were teaching. I decided to talk to a financial planner - a parent herself - for some advice on how to approach the allowance dilemma; when to give it, what to give it for, and how much to give.

In the course of our conversation, Kathie Barnes shared her own family recipe for teaching her daughter about the importance of money and how to manage it. Her core belief is that parents should definitely start the lesson early. The younger the better, she says.

"Talking about it and sharing the ownership of the financial situation... because once they get rolling down the road... and there's no awareness of what things really cost... the longer you wait the harder it is to teach it," Barnes adds. She started giving her now 13-year old daughter allowance when she was in kindergarten. She gave her three dollars - every week.

"We gave her three ones... every single week. We had three cups... that said spending, sharing and saving. One dollar went into each one."

Barnes and her husband Stephen, a certified financial planner as well, encouraged their daughter to pay attention to what she was passionate about that had financial need.

"One of the things people should do with their money is to give it away. I really believe it comes back to you in a million ways, if you do that," Barnes says. Barnes says her daughter would see the money pile up, especially in the savings cup and they eventually opened up a savings account for her. As that grew, they opened up a securities account.

"When she was in 7th grade, we changed it to a monthly allowance. We just did $25 a month but we encouraged her... to (divide) it the same way but she could determine the breakdown of it because it was her money."

Barnes noticed her daughter expected her to still buy her everything, such as $45 jeans. So in eighth grade, Barnes decided to give her daughter a $100 a month clothing allowance.

"I tried to figure out what we were reasonably spending for her, because I didn't want to cramp her style, but I wanted her to get a reality check of what does it really cost," she says.

I asked Barnes about why she didn't give her daughter an allowance for doing chores around the house like many families choose to do.

"She does help at home but we don't believe in paying for that stuff because it's our home and everybody participates in the upkeep of it, to a certain extent," she answered.

The Barnes did, however, start paying their daughter - in the third grade - to start helping out around the couple's office. They started at $2 an hour. She now earns $5 an hour. "She's told me minimum wage is higher than that," Barnes laughs.

Barnes says implementing a new allowance plan usually works best when children are in new situations like going into middle school, high school or college. "Kids are so money motivated," she says.

Hers is certainly not the only option. But with today's children being saturated every date with commercialism on television and labels at school, it's certainly worth a try.

Reach Kathie Barnes at www.barnesinvest.com