A how-to guide for parents
A lot has changed in child rearing since the "Leave it to Beaver" days. Back then, parents were more likely to make all major purchases for their kids, and an allowance - if they got one at all - was usually spent on comic books and candy or socked away in a passbook savings account.
Fast forward to today, where some experts estimate kids under age 12 spend over $30 billion a year themselves and influence another $500 billion in purchases. It's not uncommon today for teenagers to have access to their parents' credit cards, and some feel that the ease and availability of online purchasing may render cash more or less obsolete.
Just as children's and parents' spending habits have changed over the years, so have attitudes about allowances. There is much debate about allowances, including issues such as:
- What values the parents want to teach with an allowance (e.g., thrift, money-management skills, social responsibility)
- How the amount should be calculated (based on age, level of responsibility, parents' income)
- What children are being paid for (routine chores, extra work, getting good grades)
- What expenses it should be used for (candy, entertainment, clothes, saving for college or a car)
The bottom line is, every family's situation is different, so there's no one-size-fits-all approach. To help you decipher what's out there, we've put together the following resources that may help you determine an allowance philosophy and delivery method that works best for you.
1. Use allowance to teach valuable money skills
Visa's Senior Director of Global Financial Education Jason Alderman shares his views on using allowances to teach your kids sound financial habits and as a tool to teach important life lessons. Click here to read more.
2. Allowance comparison calculator
It's probably been a long time since you got an allowance yourself, so you may be wondering how what you're giving your kids compares to what you earned. You plug in their age, their allowance amount and your allowance at that age and our online, interactive calculator compares the amounts, factoring in inflation.
3. Calculating a needs-based allowance
Your kids have certain needs-based expenses that are either non-discretionary (school lunches, clothes, transportation, etc.) or discretionary (toys, entertainment, snacks, etc.). The question is, which of you should be responsible for managing these expenses. The following online calculator will help you tally these expenses and assign responsibility.
4. Saving for a goal calculator
Nobody likes delayed gratification, but one of the best things an allowance can do is help your children learn the value of saving for things they really want. Use the interactive calculator below and let your kids plug in how much that new PlayStation 3 costs, how much they've already saved to learn how much they need to set aside each week and how long it will take to reach their goal.
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