"What if my kid wants to spend his allowance on fireworks or a pellet gun?" you may be thinking. Don't worry – allowances can come with some oversight. But instead of making a list of banned items, Leatherman suggests setting up general guidelines like, "You can spend your allowance however you like, as long as it doesn't cause a problem." This gives you plenty of wiggle room. If your 6-year-old wants to buy a week's supply of cavity-causing sugar bunnies, simply cite the "cause a problem" clause.
How can I teach my child to save and to share?
You may want to let your child take charge of how much of his allowance to spend, how much to share, and how much to save. That's fine – he's sure to learn from his own successes and mistakes.
Alternately, you can build in guidelines that reflect your values. You can require your child to save 10 percent of his allowance and donate another 10 percent to a charity he chooses. And you may want to divide the savings into "fixed" and "revolving." The fixed savings go directly into the bank, to be reserved for a long-term expense such as college or a car. The revolving savings remain at home with your child, for him to dip into at his discretion. Even if he depletes his stash on a regular basis, he'll still learn firsthand how helpful savings can be in a pinch.
To encourage your child to make thoughtful decisions about money, consider forgoing the standard one-slotted piggy bank in favor of one with separate compartments. Examples are the Moonjar Moneybox and the Money Savvy Pig.
Is it okay to let my child borrow against his allowance?
"Mom, will you get me this toy?" your child begs with puppy dog eyes. "I'll promise I'll pay you back as soon as we get home." What should you do? As long as you're comfortable with the toy and the price, making the short-term loan can be a good lesson for your child. But have some safeguards in place.
"First, have your child sign the receipt," says Leatherman, in case he develops sudden amnesia about the agreement. "And don't give him the toy until he gives you the money." If upon arriving home, he discovers he doesn't have enough to pay for it, keep the toy until he earns or saves up the money. If the money never comes your way, feel free to get creative: The next time you hand over his allowance, include a "bill" for the toy.
What about giving advances?
Your child's best friend invites him to go to the movies, but he's already blown through his allowance. Should you give him next week's allowance early? "If your child is generally responsible with money and you feel confident that he'll pay you back, it's fine to give him an advance," says Leatherman, though it's a good idea to have him sign an IOU.
If you're not so sure, consider requesting collateral. "Have your child give you a possession that's equal in value to the amount he's borrowing," Leatherman suggests. And make sure it's not some broken or long-forgotten toy – the collateral needs to be something he'll want back. Return the collateral when the next allowance time rolls around and he makes good on the loan.
Of course, you can always just say no, especially if these advances are becoming an everyday occurrence. Your child may be disappointed about missing the movie, but he'll learn about the importance of building a "rainy day" fund.
Is it smart to tie my child's allowance to chores?
While many parents tie allowance to chores, Leatherman recommends against it. "Depending on your child's mood, allowance may not be enough to motivate him," she says. In which case, you're stuck with undone chores.
Also, when children get paid for chores, they don't fully experience what being a family member, a team member, is all about. It's important to teach them that all family members have responsibilities to the group. And that's nonnegotiable. Though they may gripe about doing the dishes, the need to contribute in a meaningful way is fundamental.
