Time to Start With an Allowance, But Don't Let It Be a Handout

Ages 6-7: Time to Start an Allowance

Children will spend unlimited amounts of money as long as it's yours. When their money is on the line, they've got skin in the game, as one of my regular correspondents is fond of saying. The best way to let them start making their own decisions is to give them an allowance, and this is a good age to begin.

For one thing, children are learning about money in school, so they understand that four quarters equal one dollar. Also, they have a more mature understanding of money in the abstract, so they have some sense of how much that dollar will (or won't) buy, and they can plan further into the future. Think of it as stealth budgeting.

How much to give? Start with a basic weekly allowance equal to half the child's age. I know, I know. Some people recommend giving a weekly allowance equal to a child's age. But in the real world, I've found that parents often balk at giving a 6-year-old $6 a week. Hence my half-age rule. If you'd like to bump that up, feel free.

Now for the even bigger question: Should the allowance be a quid pro quo for doing chores? My advice: No. I'm in the camp that believes kids should clean their room or help unload the groceries because they're asked to, not because they're paid. Plus, over the years, I've learned that many parents have a tough time keeping track of whether their children have actually done their assigned chores that week.

But an allowance shouldn't be a handout. My rule: Tie the basic allowance to "financial chores" -- spending responsibilities that the kids take over from you. You could start by having them pay for their own collectibles, for example, or refreshments at the movies. The beauty of the system is that as your kids get older, you can expand their allowance and their responsibilities.

To make the connection between work and pay, give your children the opportunity to earn money by doing extra jobs, such as vacuuming the family room, raking leaves or washing the car, and pay for each task as it's completed to your satisfaction. That's easier for you to monitor than a week's worth of chores. Remember: Keep things simple.

Next week: Ages 8-10