Making Allowances for Your Kids' Dollar Values
Would you stoop to pick up a found penny? If you believe in the value of money or the possibility of luck, you would. Unless, of course, you're a teenager.
When Nuveen Investments asked 1,000 kids ages 12 to 17 to name the sum they would bother to pick up, 58 percent said a dollar or more. Some won't give pocket space to coins even if they're already in hand, says Neale Godfrey, author of Money Doesn't Grow on Trees. Many high schoolers buy lunch and throw away the change, she says. As one boy explained to her, "What am I going to do with it?"
This cavalier attitude is making some parents rethink the allowance tradition. The weekly stipend is meant to help kids learn about money, but some experts say too much cash--easily handed out in these flush times--and too few obligations can lead to a fiscally irresponsible future. Many kids have a " lack of understanding [of] how hard it is to earn money," says Godfrey. "That is not OK."
Allowances, done right, are a way to teach children to plan ahead and choose wisely, to balance saving, spending, investing, and even philanthropy. Doing it right means deciding ahead of time how much to give and how often to give it. And it requires determining what the child's responsibilities will be.
About 50 percent of children between 12 and 18 get an allowance or cash from their parents, says a survey conducted in 1997 by Ohio State University for the U.S. Labor Department. The median amount they got was $50 a week. (Teenagers in the East North Central region, which includes Ohio and Indiana, get the most--a median of $75 a week--and kids in the East South Central, including Mississippi and Alabama, are given the least, with a median of $30 a week.) Nationally speaking, about 10 million kids receive a total of around $1 billion every week.
No free lunch. The problem with a parental open-wallet policy, says Godfrey: "If you're always given money, why would it have any value to you?" Earned money is spent more wisely, she says. "You're teaching them that there is not an entitlement program in life. The way you get it is you earn it."
Godfrey thinks an allowance should be chore-based, and she divides work into two categories: citizen-of-the-household chores and work-for-pay chores. "The punishment for not doing your work-for-pay chores is you don't get paid." Other experts, including Jayne Pearl, author of Kids and Money, believe that every family member is entitled to a small piece of the financial pie and that it shouldn't be tied to work. Doing so "complicates things unnecessarily and imbues allowance with power struggles and control issues," says Pearl. "I think of [an allowance] as learning capital. . . . They have to have some money to practice with."
For many kids, 3 is a good time to begin getting an allowance, experts say. This sounds early, but it's then that children start understanding the notion of exchanging coins for, say, candy. Deciding how much to give can be tough. "If the parents can afford it, I have them pay their age per week," says Godfrey. "A 3-year-old gets $3."
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