Canadian Money

The old adage that the only sure things in life are death and taxes can be amended if you’re a parent; add “Allowance”. Whether you’re the one wearily doling it out or the not always grateful recipient this simple way of giving children pocket money can be anything but simple. At what age does one start? How much? How often? Is it dependent on chores? Is it something that can be used as a punishment? There is a veritable minefield of allowance questions that parents have to consider and we’ve dived in to try and make sense of it.

When do you start giving allowance?

How do you want them to use their allowance?
In other words what is their allowance for? Do you want them to buy everything they need from their allowance such as clothing and school supplies? Or is it just fun money? At 8 & 6, I don’t want my kids to be too serious about their money so I give them a little bit just for fun. They like to buy the odd toy, book, gum or bag of popcorn at the skating rink so they get $5 and $2 respectively.

Age of the child
This allowance calculator suggests a dollar for each year of age which may be a great place to start. We started last year when the children were 5 & 7 respectively. Once allowance has been in place for a while evaluate how it’s going. Is this enough pocket money? Are they spending it reasonably? Does it still work within your family’s budget? I am probably underpaying them, but they will each get a ‘raise’ on their birthday.

Purchasing Power and the Time Value of Money:

Consider what things cost today. When I was 6, a chocolate bar cost 50 cents at the corner grocery store. Today, depending on where it’s purchased, they cost about $1.25. And what will your child will buy with his money? A 5 year old doesn’t have the same wants as a 13 year old; while a dollar store toy and a small slushy might satisfy the 5 year olds consumerism, the new video game or makeup that your tween want will cost more than a few dollars.

Do you tie allowance to doing chores or good behavior?
This is a tough question. We have a basic number of chores that the children have to do and fortunately they usually do them. However at the beginning they slacked off on their chores and they experienced Black Friday rather than pay day. This happened once and since then the dishwasher is unloaded without nagging and beds are mysteriously made without reminding. I don’t recommend withholding allowance as a way to punish other bad behavior. I did that once and the outrage and mistrust that it caused was worse than whatever it was I was trying to punish.

Some ways to teach them that money doesn’t grow on trees

Allowance jars
When I started giving my daughter allowance I gave her 2 jars in addition to her piggy bank. One was labeled “Spend”, the other was labeled “Bills”. What bills could an 8 year old possible have? The ‘bills’ in this case is the $1 that she has to bring each week to her Brownies meeting to contribute to the troupes finances. Although it would be nice to recoup some room, board and gas money…
The spend jar is so she can buy gum or treats during the week when we’re out and the piggy bank is for saving. I found breaking it out in this way really helped her physically relate the inflows and outflows of money.

Make them save for big purchases:
My daughter has been dying for an ipod touch, especially since EVERYONE else has one. So we helped her save up for one. We looked up the price in the weekly flyers and each week she save her allowance until she could pay for it herself. It was a long slog, but she takes very good care of her device and proudly tells her friends she paid for it with her own money. Now she’s saving for an American Girl Doll.

Pay Monthly
Most of us get paid monthly and have learned to budget accordingly. A great way to help kids understand money does not come easily is to pay allowance once a month and teach them how to budget for themselves. (It’s also a bit easier for the Bank of Mom & Dad then coming up with cash each week, especially for those of us not used to carrying cash any more!)

Regardless of how you do it, giving your kids allowance is a great step for their independence. Find a solution that works for you and your family, and if it’s not working for you, reevaluate and change it up.