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| Parenting |
Making Allowances for Youth
Mary Lowengard
04/01/2004
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Nickels and
Dimes
Although hard data about allowances, children and attitudes toward
money are scarce, these issues are clearly on our minds as parents. The December
2000 U.S. Trust Survey of Affluent Americans reflects a widespread fear: that
our children will grow up naive about the value of money and the effort required
to earn it, and so will spend beyond their means. “How children handle money is a
very valid concern that requires hands-on experience,” notes Michael J.A. Smith,
managing director at Deutsche Bank Private Wealth Management. “It should be
methodically addressed through education, communication and conversation about
how to save, how to keep track of what you spend, and how to build and live
within a budget.”
TOP VIEW
When we establish our children’s allowances, we have a unique opportunity to
foster their financial independence while teaching skills such as budgeting and
investing. To make the most of this, some of us take a three-pronged approach,
earmarking one-third of the allowance for spending, one-third for saving and
one-third for charitable giving. |
There are no hard and fast rules about when to start
giving an allowance or, for that matter, how much. Some experts maintain that
earlier is better—as soon as a child can distinguish between nickels, dimes and
quarters, which can be as young as 3 or 4. Charles Collier, senior philanthropic
advisor at Harvard University and author of Wealth in Families, offers this
counsel: “Based on my work among wealthy families, I’ve concluded that it is
very important to give an allowance as early as ages 7 or 8. It’s a critical
educational experience for a child to understand about spending, saving and
losing money.”
Psychotherapist Eileen Gallo, author of Silver Spoon Kids: How
Successful Parents Raise Responsible Kids, and her husband, Jon, who founded a
wealth-counseling firm in Los Angeles called the Gallo Institute, are
hard-liners when it comes to allowances: All children should get one with no
strings attached. An allowance, says Eileen Gallo, represents a sharing of
family resources. Chores, such as making beds, room-straightening and feeding
the hamster, should be uncompensated duties, part of sharing of family
responsibilities, and should not be linked to an allowance. An allowance, she
explains, should not be viewed by us as a form of compensation or as punishment,
but rather recognized as a golden opportunity for teaching the values and uses
of money.
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