Giving an allowance to your kids does more than just allow them to treat themselves each week. Did you know it can also be useful in teaching them how to manage money?
Young children can learn how to value money when it is given to them on a regular basis. Not convinced giving them an allowance is the right thing to do? Below, we will reveal some of the biggest benefits of using an allowance to teach kids how to manage money.
Related: The average allowance by age
Pros of allowance for kids
There are lots of reasons an allowance can be good for kids. From teaching them financial responsibility to helping them discover the value of hard work, let’s look at a rundown of some of the biggest advantages of an allowance. including;
- Financial planning
- Saving and budgeting
- Spending responsibilities
- The value of money
- Appreciation and achievement
Teaches financial planning
One of the main benefits an allowance has for kids is that it lets them practice their financial planning. This is a crucial skill they will need when they reach adulthood, and it could save them a lot of stress and money later in life.
When they receive an allowance, kids need to decide how to spend it. They need to determine how much they want to save and how much they have available to spend. As they get older, you can start to set them targets, such as using their allowance to pay for some of their expenses. Learning how to manage their money lowers the risk of financial issues in adulthood.
Teaches saving and budgeting
Saving money isn’t always easy, especially when you’re an adult. However, if you teach crucial savings skills from a young age, it makes saving more of a habit. If your kids get used to saving a portion of their allowance now, they will have no problem saving as they grow up.
Another key skill an allowance can teach is budgeting. Some kids, especially younger ones, may not be known for their high levels of restraint. So, anything that helps them to learn about delayed gratification is going to prove beneficial.
If you don’t teach kids about money early on, it can greatly impact their independence. They may become reliant upon others to help them out financially. Being financially stable means that you have a lot more options in life. So, how does an allowance teach kids independence?
When you give your kids an allowance, it’s up to them how they manage it. They need to make the right choices to ensure they can afford the things they want and need. Through making their own choices, they gain vital independence that will help them as they progress in life.
Related: Does an allowance teach independence
Teaches about spending responsibilities
An allowance teaches kids about spending responsibilities. They learn that they need to pay towards expenses and set money aside for emergencies. While it can take a while, your kids will learn how to start prioritizing their financial responsibilities and become more prudent about the money they do spend.
Teaches the value of money
Kids don’t always understand the concept of money, particularly when they are younger. If you want them to start learning the value of money, giving them an allowance can help.
When they see that money doesn’t come for free and it only goes so far, they will learn to be better at handling it. They will also enjoy receiving the regular payments and become more driven to make their own money.
Shows appreciation and achievement
An allowance can also be used to show appreciation and achievement. Perhaps your kids helped out around the house more than usual? Providing them with an allowance for their contribution can show your appreciation. The GoHenry app lets you set chores. As your child completes them, they will receive the agreed payment. It also rewards them for their hard work and motivates them to help out more.
These are just some of the benefits giving your kids an allowance can provide. So, how does it compare to other rewards?
An allowance vs other rewards
There are a lot of ways to reward kids for good behavior other than by giving them an allowance. Other popular rewards include:
- Days out
- Food treats
While each of the above can be highly motivating to kids, they don’t teach anything other than reward. With an allowance, it teaches them about money management. It also arms them with the knowledge they need to help secure their financial future.
If you are looking to simply reward your kids for doing their chores, other rewards are ideal. However, if you want to help them learn and develop financial independence, an allowance is the best option.
Are there any disadvantages to giving an allowance to kids?
There are a few different pros and cons to an allowance. The main concern is that your kids might start to expect to get money for nothing. This can happen when you give them an allowance without teaching them anything. If they get a set amount every week and they don’t need to earn it, your kids may not truly appreciate the value of money. Of course, giving an allowance or paying for chores is a personal choice. Some parents choose to do both: they give their children an allowance, which can then be topped up with paid chores.
There are a lot of reasons why an allowance should be earned. So, if you do plan on giving it to your kids, make sure you go about it the right way.
What’s the best way to give allowances to your kids?
The best way to give an allowance to your kids is through an allowance app. At GoHenry, we offer a kid’s prepaid debit card and an accompanying app. The card enables your children to actively participate in the digital economy and spend in the same way they will as adults. It also provides a safer place to store their money as it won’t get lost down the back of the sofa.
GoHenry’s in-app Money Missions can also accelerate your child’s financial education via interactive games and quizzes on topics such as saving, spending, and budgeting.
While there is some debate on whether an allowance is beneficial for kids, when handled correctly, it can teach them to be financially responsible. As you can see above, there are plenty of potential benefits an allowance can provide. The more clued up children are about money and how it works, the less likely they’ll be to fall into financial difficulties later in life.