How to establish money rules for your child at any age
How much allowance? Do kids need to save? The money expectations you set for your children while they’re young could help them develop lifelong financial skills. Here are seven steps to take to build money rules that make sense for your family.
Don’t treat a 10-year-old like a 16-year-old
If you set money rules, make sure they’re age appropriate. Some guidelines: As young children reach fourth and fifth grades, they start to grasp the value of a dollar and the concept of saving. By middle school, children understand that the clothes and games they covet can cost a lot. And as they get into the teens, kids have a much better grasp of how much stuff costs and are capable of understanding quite a bit about money if they are actively taught how to manage it.
61% of parents give an allowance. Will you?
Will you join the 61 percent of parents who give their kids regular allowances? Will you be like the 48 percent of parents who pay for good grades, according to a 2012 study—the most recent available from the American Institute of CPAs (AICPA)? There is no right or wrong approach, but it is helpful to let your children know your philosophy and expectations. For more, check out our articles on helping younger and older kids manage allowances.
Make them work for it? Not so fast
Many families find it helpful to have a rule about chores. According to the AICPA,1 89 percent of parents require their children to earn their allowance and work at least one hour a week. Some financial experts, however, say an allowance is a learning tool and should not be tied to chores; children should do chores simply because they are members of the household.
Their money, but your call
For young children the list of expenses typically includes discretionary items, such as toys and apps, while middle schoolers are mature enough to take on more responsibility. By the teen years kids have expenses such as hobbies and sports. Some parents may choose to ask teens to be responsible for entertainment while parents pay for the after-school activities. Or teens could pay a percentage of all of their expenses.
Let them watch their money grow
Fifty-four percent of families require children to save at least part of their allowances, according to Consolidated Credit Counseling Services.1 Whether or not you give an allowance, saving can be an important lesson for children and help them learn delayed gratification. Parents could ask elementary schoolers to regularly set aside money for a coveted toy. Experts also recommend that both elementary- and middle-school-age kids set savings goals and write them down as a reminder. In high school some teens are ready to start saving for multiple goals, including longer-term expenses such as college.
Decide if giving to charity is required
Thirty percent of children set aside a portion of their money for charity, according to a survey from DoughMain.1 If this aligns with your family’s values, consider making philanthropy a rule in your household. It’s easiest on young children if you ask them to set aside money for charity, whether it’s part of an allowance or a birthday gift, as soon as they receive it. As children get older, parents can make a rule about what percentage of their money should go toward charity.
Determine what’s off-limits
Just because children have their own money doesn’t mean parents don’t get a say in how they spend it. That doesn’t mean micro-managing, or denying them things that you deem wasteful: Give them an opportunity to learn about making choices and trade-offs. But experts recommend that parents come up with a list of items that are strictly off-limits, based on rules you may already have in place around what your children are permitted to do or play with.
- All survey data (AICPA, Consolidated Credit and DoughMain) is from 2012 and the most recent available.