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No-nonsense guide to allowance

How parents can make the most out of their child’s chores

Piggy bank, allowance

Financial literacy is among the many life skills parents need to teach their children. However, according to the Networks Financial Institute, more than half of all parents believe that their child feels that “money grows on trees.”

Child and Adolescent Family Therapist Darby Fox explains how to lay the ground work in raising money-wise children through an allowance.

"Allowance is a great opportunity to teach children about money," says Fox. "A good age to start is around 7 or 8 years old. At this point they are old enough to understand the concept of money and have the basic arithmetic skills necessary to add and subtract.”

Fox goes on to explain that before age 7, children aren’t mentally developed enough to benefit from receiving an allowance. The connection between earning and spending money is still too abstract. Parents are better off waiting until their child is a little older, when they can appreciate the lessons and responsibilities that come with receiving an allowance.

READ MORE: Hey kid, money doesn't grow on trees!

A mistake many parents make is using allowance as a reward system for good grades or as an incentive for good behavior. It’s more important to encourage a child’s work effort than it is to offer payment, or even a bribe, to children for conducting themselves appropriately.

A better approach is to give the child chores that are expected to be done each week for a set payment. Fox advises that parents should withhold money for tasks not completed.

“It’s important to remain consistent and clear that allowance is payment for finishing chores, and not something they are entitled to receive,” recommends Fox.

Allowance can start at around a dollar a week and increase over time as children are able to complete more tasks. If a child is saving up for something special and would like to earn more money, this is a good opportunity to teach more work for more reward. Set up additional tasks that will result in bonus allowance.

“Allowing children to earn their allowance, rather than simply handing it to them, will give them a sense of pride and help them better understand the concept of money,” says Fox. “Granting allowance without requiring chores is a missed opportunity to help a child grow both intellectually and emotionally.”

Allowance is great way to begin the conversation about financial responsibility and money management with young children. Parents might want to require that their children split their earnings between savings, donation, and spending. This is a simple way to teach children that giving and saving are responsibilities that come with receiving an income.

Darby Fox has over 20 years of experience providing individual and group therapy in both non-profit and private settings.