Whether or not you put strings on receiving the allowance, once it's his, you really can't make your child use it as you want. That's just not fair (not that everything has to be fair, of course). After all, you want your child to think for himself when it comes to money. According to a survey on teens and money consulted by USA Weekend, 75 percent of kids had complete control over their money.
You may want to place some expectations on how your child spends it, but you really can't require your child to use the allowance as you see fit. You can, however, provide guidance on how the money should be used by discussing these issues with your child.
Dictating Your Child's Spending
In receiving an allowance, your child faces a great temptation to spend it all at the first opportunity. But one of the reasons for giving an allowance is to make sure that your child has money for the things she wants when she wants them. To do this, she'll have to think ahead.
Piggybank on It
Talks about how to use an allowance should be done periodically. As your child gets older, suggestions on how the money should be used will naturally change. (The topics of spending, saving, and investing are discussed in Teaching Your Child About Money Management, and Setting Up a Budget for Your Child, and Understanding Financial Terminology. )
Piggybank on It
Some clothes are necessary (such as a winter coat, underwear, and a pair of shoes). Having 15 sweaters, however, may be desired but certainly not necessary. Consider suggesting that your child pay for the extras in this category from his allowance.
You can help your child decide how to allocate her money. Of course, the allocation will vary greatly with a child's age, the amount of allowance, and other factors. Here are some categories that are commonly considered:
- Car. Obviously, this is only a concern when your child is of driving age. He may be responsible for putting gas in your car when he uses it, or he may be able to save up and pay for the purchase and upkeep of his own car.
- Charity. When you give to charity, you set an example for your child to follow. Certainly, children learn about giving to charity through the UNICEF Halloween collection program, the Girl Scout cookie drive, and in religious schools. You can suggest she set aside part of her allowance for charity and help her decide how to make her contributions.
- Clothing. As kids (especially girls) get older, they tend to spend more money on clothes.
- Entertainment. The extent to which your child uses his allowance for fun is up to him. In the past, teenage boys used to get bigger allowances than their female counterparts because boys were expected to pay for dates. Today, teenagers don't have the same dating mores that their parents had. For the most part, they don't have dates in the conventional sense—they may go out in groups or do other activities together. Generally, girls and boys share the cost of entertainment.
- Savings and investments. It's important that children start at an early age to view saving money as a regular activity. The best way to do this is to suggest that they set aside part of their allowance for this purpose. If you insist that they're responsible for paying for certain things such as the going to the movies, then they'll be forced to save or go without.
- School expenses (extracurricular activities and other expenses). While school may be public, many trips and other activities at school are certainly not free. You may want your child to be responsible for these things. Again, you may decide to share expenses (for example, she pays the activity fees but you buy the equipment). Should an allowance cover the costs of school lunches? When a child routinely buys lunch at school, adding in the cost of lunches to the allowance may make it easier for a parent (there's only one amount that needs to be given each week instead of two separate amounts). But doing this creates a temptation for your child to skip lunch and use the money for other things. If the one-payment system is used, be sure to talk about how the money should be used.
- Toys and video games. As with entertainment, kids should be allowed to use their allowance on fun things, as long as allocations have been made for savings and other categories that are necessary.
How Much Parental Guidance?
Providing guidance on what your child should do with his allowance is certainly a wise thing on your part. But how much influence should you exert? Can you insist that a certain percentage of the allowance go toward savings? Can you require your child to pay for all her entertainment costs? There are no hard-and-fast rules; decisions here are guided in part by the age of your child, the size of the allowance, your personal beliefs, and other factors. Clearly, whatever you think the allocation should be, getting your child to follow suit requires a little finesse on your part.
Watch Your Step
If your child is supposed to pay for his own toys and entertainment, it's not a good idea for you to pay for them whenever he's short of funds. This won't help in teaching responsibility for managing money. He'll just have to forgo a movie it he doesn't have the money for the ticket.
At one extreme, you can say nothing and let your child make all his own decisions. On the other extreme, you can set requirements on how the allowance should be allocated among the different categories of expenditures. Somewhere in the middle is where you'll probably want to fall, providing guidance without making the child feel like there's no point to receiving the allowance in the first place. Of course, it goes without saying that your child should know without a doubt that the allowance would stop in a second if it were to be used for drugs, alcohol, or other illegal activities.
Helping your child make spending decisions by setting up a budget and allocating a portion to savings is discussed in the next part of this book.