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Making allowances

Should you give your kids an allowance? How to teach money skills without creating a sense of entitlement

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Originally published in Today's Parent March 2010

In Margaret Johnson’s view, kids are woefully uneducated about money. “I once asked a group of school-aged children where money came from. One little girl said, ‘From the machine,’ and when I asked what happened when the machine ran out, she replied, ‘You just go to another machine.’”

Her advice to counter this attitude? “In order to learn about money, kids need to have some of their own. An allowance is a great way to do this,” says Johnson, who in addition to being president and CEO of Solutions Credit Counselling in Surrey, BC, volunteers her time teaching elementary school students about money.

Johnson says six- to eight-year-olds are ready for a little money of their own, even though some will head straight to the candy store. But parents shouldn’t place restrictions on what happens to it. “Better to learn from their mistakes at this age than when they’re older,” says Johnson. And there are ways to teach saving as well as spending. Here’s how:

Make it real Johnson recommends giving the allowance in coins. “Kids love to look at them and touch them, and they can put them into their banks.” Show her that five pennies equal a nickel, two nickels equal a dime, and so on. “They start to see how it works,” says Johnson.

Decide on the amount Chelsea Reynolds gives her daughters, Bryn, eight, and Tegan, six, $2 a week. Other parents use a rule of thumb like 50 cents for every year of age. Johnson suggests parents consider what they can afford and what they expect their children to use the money for. Be sure to give the allowance consistently, perhaps every Saturday morning.

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