| Family Management | Elementary | Ages 6–10

Allowance offers real-life financial lessons

The boy, about 7, kneels in front of the Yu-Gi-Oh card display, a ziplock sandwich baggie of single bills and quarters clutched in one hand as he carefully sorts through the brightly colored packs. "I have $12.50," he says. "That means I can afford three packages since they cost $3.99, right Mom?" Mom sighs. "Yes, I guess, if this is what you really want to spend all that allowance on... but don't forget about sales tax."

Kids' discretionary spending sometimes looks to parents like money squandered. Kids, though, are learning to equate perceived value with actual cost -- a cause-and-effect relationship many adults still struggle to absorb. An allowance give kids this power, but before implementing one, experts say, parents need to think the issue through.

Lori McConnell, a licensed mental health counselor and child therapist with a practice in West Seattle, helps parents resolve allowance issues in a workshop called Family Rules. The most important thing parents need to determine, McConnell says, is whether their goal for allowance is to give their children a chance to practice with and control their own money, or to motivate behavior. Parents in the first category need to be ready to let go of the money once they've handed it over. Children can then make their own spending decisions.

McConnell, who also works with teenagers, says that she sees a real difference in teens who have had allowance during their younger years. Such teens, she notes, are "much more grateful about the things they have, and understanding about how their parents had to work for the money. They balance their own spending choices and plan purchases carefully."

McConnell finds that kids who've learned to consider purchases, rather than to believe the constant media barrage encouraging instant gratification, are more ready to navigate their teen years. That instant gratification, McConnell notes, factors into many self-image issues kids face growing up in our media-soaked culture. Children who use their own money to buy a certain much-hyped toy, for example, and learn firsthand that it doesn't thrill as the advertisement promised, may have an easier time turning their back on the notion that a certain brand of clothing or even being a certain body size will make them happy.

"The media tells us that if we buy 'X,' or do 'X,' or look a certain way we will be happy. Teens who've had allowances have an easier time resisting that kind of thinking," McConnell says.

How much allowance kids receive depends on family finances, experts agree. Many parents find that one dollar per year of age per week is a good measure. This makes sense to siblings who might otherwise resent big brother getting $3 more each Saturday, and gives kids a yearly raise to anticipate. Many experts suggest that 6 is a good age to start allowances, but parents of multiple children may find it helpful to include the younger siblings in the program by age 3 or 4.

Everyone should be clear about what purchases allowances will cover: Toys? Sweets? Comic books? Some parents encourage kids to set aside some portion of their allowance for charity or savings. Parents should have cash on hand each week and pay allowance regularly. As for advancing allowance: It isn't easy to say no, but many parents find that advancing allowance is like giving kids a credit card. If parents don't advance, kids learn the important lesson that when the money's gone, it's gone.

Parents who give allowances not tied to specific jobs may also want to offer kids the chance to perform paid tasks. A few extra dollars earned folding laundry or pulling dandelions will help the 7-year-old saving up for that $84 American Girl doll.

Parents who opt to use allowances to motivate specific behaviors may find that it decreases daily nagging about chores and homework. McConnell encourages her clients who are using this method to keep track of points daily on a calendar. Each point can equal a dollar, with an additional bonus of $2 or $3 for kids with a perfect weekly score.

Parents can also consider tying points to activities such as a family outing, special dinner, or bike ride with mom instead of using a cash scale. Younger kids, she says, sometimes lose track when their behavior is tallied on a weekly basis. Knowing that he got his star or check on Monday and can try again on Tuesday is easier to understand.

"Younger kids can really buy into this and stay motivated," McConnell explains. "Pay-for-job loses strength with this age and can even be confusing."

In the end, allowance lives up to its name: It allows kids to learn, practice and perfect financial skills while the stakes are low. And the hope is that these lessons will hold firm and help them manage their money wisely when -- sooner than parents might imagine -- the stakes climb higher.

Paula Becker is a Seattle freelance writer and mother of three.

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