Allowance for kids? Start early and don't tie it to chores, says finance expert
‘You want to teach them the mechanics, allowance helps you do that’
Giving your children an allowance and using it as a learning tool can help avoid costly financial mistakes down the road, a personal finance expert says.
"It is the best way to teach kids about money as a tool," Bruce Sellery told Daybreak Alberta on Sunday.
"You pay for it later. Some kids just develop the skills elsewhere but for many kids, they don't. They become adults and they do some really dumb things with real consequences. And truthfully, some people never learn."
Sellery says teaching children the value of money can be done alongside with other learnings about becoming an independent adult.
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"You want to teach them the mechanics, allowance helps you do that," he explains.
"It helps them figure out trade offs, if they are holding the money in their hand. It helps them develop habits that work for them and it gives them the feeling of being independent, because 'I don't have to go and ask for money, I have my own money.'"
Sellery says he recommends against tying allowance to chores.
"You never, never tie it to chores," he said.
"If you connect it to chores you have introduced a whole other power dynamic and a behavioural dynamic which actually takes away from teaching them money as a tool. It takes you off course. It is not that there are no consequences for chores not being done, it's just those consequences are connected to the chores themselves."
What's a good age to start giving kids an allowance? And how much? Personal finance writer <a href="https://twitter.com/brucesellery">@brucesellery</a> has tips <a href="https://t.co/sGs85LT12H">https://t.co/sGs85LT12H</a>—@daybreakalberta
Laying out options and letting the child make the call, can pay off in the long term, Sellery said.
"You give them that money and you show them what the categories are that they put that money towards. They could spend it immediately, they could save for something next week, next month, next year. They could donate the money, some families have a real value around that. They could also invest the money and I love this one," he said.
"It really allows you to visually illustrate the magic of compound interest. That is an enormous lesson and one that is quite tough to teach in the absence of a practical example so that is a great way to do it."
With files from Daybreak Alberta