How to Determine Allowance

Earning, handling and budgeting money are important skills your child must learn on her path to adulthood. One of the best ways to help her develop necessary money-management skills is through her allowance. Knowing when she̵7;s ready to begin earning money, how much she should receive, whether to tie the allowance to chores, guidelines for her spending and saving and how to adjust her allowance as she matures are all essential to helping her become a fiscally responsible adult.

Instructions

    • 1

      Examine your family's budget before setting an allowance for your child. Most experts recommend paying either $0.50 or $1 for each year of your child̵7;s age. For instance, a 4-year-old would earn either $2 or $4 each week under this formula.

    • 2

      Start giving your preschooler a small allowance each week as soon as he begins to show interest in paper money and coins and can tell the difference between denominations. Use this as an opportunity to teach him about wants versus needs and show him how much money is necessary to purchase something he might be interested in, such as a small toy.

    • 3

      Provide an allowance that is not tied to the completion of basic chores. Most experts recommend keeping the two separate in order to teach a child that everyone in a family must help out without expecting monetary compensation.

    • 4

      Discuss with your child what his allowance should cover in his personal budget. If your teen needs to pay for clothes or gas for the car with his allowance, make sure he knows this and is receiving enough to cover these expenses. Also, discuss with him basic guidelines for spending smart, but, after that, be willing to step back and allow him to learn the sometimes hard lessons about making money last until payday as well as about making smart choices on where his money goes.

    • 5

      Offer a chance to earn additional allowance for completing more complicated tasks which benefit the family, such as detailing the car or helping to paint the deck. This is a good way for your child to earn extra money by putting in effort above and beyond the standard amount required of her each week.

    • 6

      Pay your child his allowance on the same day each week using small bills. This will allow him to learn to budget his money until he receives more and makes it easier for him to split his allowance as needed.

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