Introducing an allowance into your child’s life is a decision that many parents ponder over. It’s a topic that is often debated and has no one-size-fits-all answer. Ultimately, it comes down to what works best for you and your family.
However, giving children an allowance can have several benefits that extend beyond just financial literacy.
My husband and I started giving our children an allowance about 5 years ago. We give them a set amount of $20 each month, so it’s not a lot, but I have seen our children learn and grow so much in their understanding of money and the responsibility that it brings.
In this blog, we will explore the advantages of providing your child with an allowance and how it can help them develop essential life skills. Whether you are on the fence or looking for more reasons to implement it, keep reading to discover the benefits of giving children an allowance.
Learn the Value of Money
Giving your children an allowance helps them to learn the value of money. When they are just asking you to give them money or to buy them something they have no real understanding of what things cost and how that affects your budget.
But when you give them money and they have to use their own money to buy those extra things, they start to realize how quickly money goes. They start to understand just how expensive everything is and how far a dollar can go, which let’s face it, isn’t very far.
I still remember the first time we gave our kids their allowance and they felt rich. They all decided they wanted to go to Walmart and spend it on junk food. Since we don’t buy a lot of junk food this was a splurge for them. They were all surprised at just how fast their money disappeared and how little they were able to get.
I’ve also noticed a difference in their attitude when they ask us for money and we tell them no, they are much more accepting of that answer. They seem to understand a lot better when we say it’s not in the budget.
To learn more about how to help your children become financially responsible, check out Smart Money Smart Kids by Dave Ramsey.
Learn What’s Important to Them
An allowance can help children learn what’s important to them and what’s not. By giving them the responsibility of managing their own money, they can discover what they truly value and prioritize accordingly. This can be a valuable lesson in personal responsibility and decision-making.
Over time we have watched our children as they have learned to make choices about whether they were going to blow it all on junk or if there was a specific item they wanted to purchase and whether they would need to save for it. At first they would all blow it in one trip to the store at the beginning of the month, but now they are much more careful about what they choose to purchase.
I saw them learn this very quickly after COVID when inflation hit. I loved watching my children look at the prices of things they used to buy and having to decide whether it was still worth it or not. Sometimes their answer was “yes” and sometimes “no”. They would even do this when they went shopping with me. They would look at the prices of items that were on my list and then they would look at the items on the shelves and look for the best deal. Sometimes I would say let’s get something and they would tell me it’s too expensive and we didn’t need it. I was so impressed with how much they had learned.
Learn How to Save
By providing a regular amount of money, children can learn how to budget and make informed decisions about spending and saving. It also teaches them the valuable lesson of delayed gratification, as they learn to save up for bigger purchases.
This is something that my children are learning at different paces. My second oldest learned very quickly to save his money for much bigger purchases. It took 3 of my other children a little longer to learn this, but throughout this last year they have gotten a lot better at saving. My baby, who is 12, wants instant gratification and tends to spend the majority of his money when he first gets it. Baby steps, they won’t all get there at the same time!
The Berenstain Bears’ Dollars and Sense is a good read aloud for younger children to learn about budgeting money.
Learn the Consequences
Giving children an allowance can be a great way to teach them how to manage money responsibly.
One of the most important lessons kids can learn from having an allowance is the consequences of spending their money right away. When receiving an allowance on a consistent schedule they can learn to budget and plan for their expenses.
When they spend all their money at once, they quickly realize that they have nothing left for the things they really want or need. This can be a valuable lesson that carries over into adulthood, as they learn to prioritize their spending and make smarter financial decisions.
When we started giving our children their allowance we told them that their allowance was to buy or pay for “extra” things, such as going out with friends, or candy. I watched my 4 oldest children learn this within the first few months of receiving an allowance.
At first they would blow it all when they first got it. Then when their friends asked them to go out with them they would not have the money to do so. Having to tell their friends they couldn’t go was not fun and they learned from it pretty quickly.
Teaches Them to be Independent & Responsible
Giving children an allowance can provide numerous benefits beyond just the financial aspect. It can teach kids important life skills such as independence and responsibility. I talk a lot more about how to raise independent children in 7 Ways to Raise Independent Children.
I have watched my children become more independent as they have learned how to count money on their own and pay for their own items at the cash register. They have learned to look at the prices of items and to add up how much each of their items cost and figure out whether they have enough money or not. If they go over the amount they have, they know to find someone who can help them take one of their items off.
They have learned the importance of paying tithing and giving back to the Lord.
Also, how to make sure their money is kept in a safe, secure location so that it doesn’t get lost. They have learned their limits. There have been times when they wouldn’t want to spend more than a certain amount, but they knew if they took the money to the store with them they would spend it. So instead they have chosen to leave the extra at home.
These experiences have taught them how to be financially smart about their money. I don’t think they would have learned these things just by watching or listening to us talk about money with them.
A good read for older kids about budgeting, saving, and even starting a business for your young entrepreneur is How to Turn $100 Into $1,000,000.
Helps Parents Learn More About Their Kids
Parents can gain insight into their child’s spending habits, priorities, and values when they are given an allowance.
This can be particularly helpful in identifying areas where the child may need guidance or support. It also allows the parent to see what their child has learned about being financially responsible.
I have learned so much about each of my children as I have watched them spend their allowance over the last 5 years. I’ve learned who’s a saver and who’s a spender. I’ve learned about their priorities and preferences. Most of all I have learned that when it is time for them to be out on their own they will understand how money works and that they are responsible for choosing how to spend it.
Conclusion
Giving children an allowance can have numerous benefits that will help them develop important life skills. By receiving money regularly, children can learn the value of money, what’s important and what’s not, and how to save for future expenses.
Additionally, they can learn the consequences of spending all their money right away, which can help them develop good financial habits and be more responsible.
Moreover, an allowance can help children become more independent and accountable for their own spending decisions.
Lastly, parents can use this opportunity to learn more about their children’s spending habits and help them develop good financial habits that will serve them well into adulthood. By giving children an allowance, parents are not just providing them with money, they are providing them with valuable life lessons that will help them become financially responsible adults.
Additional Resources
To learn more about how to help your children become financially responsible, check out Smart Money Smart Kids by Dave Ramsey.
The Berenstain Bears’ Dollars and Sense is a good read aloud that teaches younger children about budgeting.
A good read for older kids about budgeting, saving, and even starting a business for your young entrepreneur is How to Turn $100 Into $1,000,000.
The book Finance 101 for Kids: Money Lessons Children Cannot Afford to Miss by Walter Andal is a good book to teach children what money is, how we use it, how to earn and save it and much more.
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