Here’s what an allowance can teach a child about money management:
- If you complete your chores, you’ll get some reward. If you don’t complete your chores, you don’t get a reward (no allowance unless chores are completed). This is prep for a future job scenario.
- If you do an excellent job or extra work, praise is often more of a reward than extra money, but sometimes you’ll get a monetary bonus for doing a super job.
- You only get so much for your allowance. Begging for more isn’t going to change the amount you get, so you better use it wisely, budget and save for bigger items.
- Your friends get different amounts for allowance than you do. That’s OK – learn to make do with what you have or let the difference motivate you to be a youth entrepreneur and earn some extra money by running a clever small business (ie. snow shoveling, leaf raking, newspaper delivery)
- Your wants are always greater than the amount of money you have. Prioritize your wants and save for the big stuff by asking your parents to not give you an allowance for a few weeks (so they save it for you — since you’ll probably spend it if you have it)
- Larger things are not necessarily better things. (When I was young after receiving allowances, I’d trade with my younger brothers my nickels for his dimes saying the nickels were bigger, therefore better…. until I got caught).
- Money doesn’t buy happiness. No matter how much allowance you get/save, the vicissitudes of life continue. Money is a means, not an end.
- It feels good and secure to have some small savings. Some self-satisfaction for saving your money is a good feeling. Knowing you have options because you have some money to buy a variety of things is great. Not having any money and constantly wanting it not fun.