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Allowance and Kids: A Great Way to Learn How to Manage Money

Whether to give a child an allowance is one of those topic guaranteed to elicit a variety of opinions. While parents often differ on the age to start and the appropriate amount, most agree that one of the primary reasons they provide allowance is to help their children learn financial responsibility.

Allison DeFrancisco, an escrow officer from Orange, has set up an ATM account for her daughter. Any money 8-year-old Paige receives, be it allowance for doing chores or a $20 bill from Grandma for her birthday, goes directly into the account. 

"Paige fills out the deposit slip, withdraws her own money, and keeps track of her spending," explains her mother. "It is a great way for her to become familiar with budgeting." Now that Paige sees a monthly statement that outlines exactly what she spends every month she is less inclined to spend frivolously. "She's become a saver!" says DeFrancisco with a smile.

Diane Stewig, an interior designer, views allowance as a way to encourage and reward her pre-teen daughters' efforts around the home and in school as well as a teaching tool. "I explain the difference between need and want," she says. "I encourage my children to make their own decisions how to spend their money, but I'll ask them if they've thought over the purchase carefully."

A frequent dilemma for parents is whether to give their children allowance for doing regular chores or simply give them a specific amount to manage.

Kathy Hillaird, an at-home mother of three in Placentia, posts a list of chores with a dollar amount next to each one. Some, like picking up the playroom, earn .25. Others, like vacuumin the entire house, earn as much as a dollar. "By paying per chores, the kids get to decide how much they earn," she says. "The amount varies from week to week depending on ouw hard they want to work."

Karen Herrera, Assistant City Manager of Duarte and an Orange resident, agrees that children need to learn how to manage money but hasn't yet begun giving her 9 and 11-year-old daughters allowance for doing chores. "In our home, the children do chores because it is their responsibility as members of the family," she explains. That being said, she is soon going to devise an allowance "system that rewards the girls for going above and beyond their normal household duties.

Some parents give their children a flat amount periodically for extras. "I buy my children what they need," says Kathryn Leim, a mother of four, including a college-age daughter. "Anything over that--an expensive purse or pair of high-end jeans--comes out of their own funds."

Allowance is an opportunity for parents to teach their values to their children and encourage their children to embrace money management--and their own financial decisions, whether good or bad, and learn from them. 

"Children have to make choices," adds Leim. "Ultimately, financial responsibility is about making choices that are best for you without overspending." 

For more on children and allowance, check out these links:

Differing Views on How Much to Give for Allowance:  http://archives.chicagotribune.com/2009/dec/06/business/chi-tc-biz-ym-allowance-1206dec06

Chores and Children:  http://life.familyeducation.com/jobs-and-chores/parenting/36443.html

Should You Give Your Kids Allowance?http://articles.moneycentral.msn.com/CollegeAndFamily/RaiseKids/ShouldYourKidsGetAnAllowance.aspx

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