Giving an allowance to our children can be a great experience for them to learn how to manage their money before they are an adult. We give our kids a tremendous gift by letting them practice, make mistakes, and learn.

Some general tips can make this allowance process easier and more effective.

When to begin

- You shouldn't give an allowance until the child understands numbers and money concepts. A 3-year-old would cry if he got a dime and sister got seven pennies. We usually start at the age of 5 when they are learning money values.

When to stop

- As important as it is to have an allowance for children, it is equally important to know when to end it. In our home, allowance ends at the age of 12. This is discussed far in advance, so the children are fully aware of it and can be prepared.

Why end at 12? The most important reason is at this age, the child is able to earn his own money. He is fully capable of doing enough "money chores" to provide for his spending money. Also, she can babysit or do yardwork for others. We call it the age of "Financial Accountability." At this age, she needs to learn to manage her own income. She needs incentive to earn some. Stop the allowance and that will magically appear.

When to give

- I thought it was logical to pay a weekly allowance to my children. In the first few months, I almost went bonkers. Who carries around small change and small bills? My hubby and I would be scrounging for quarters. It was ridiculous.

We realized that monthly allowance would be much easier. On the first Saturday of the month, we would give out allowances to the children.

This did a number of wonderful things. First of all, it solved our cash dilemma and saved our brains from weekly overload. Once per month, we could plan on having the appropriate cash amounts.

Second, the children got a large amount at one time. This allowed them to buy better stuff. Think about it. You could get $1 a week. But, all you could buy would be junk. However, with $5 you could buy something more substantial. Of course, we had to put the brakes on going and buying pound-sized bags of candy.

Third, the children had to manage their money all month. This process taught wonderful lessons on frugality and postponing pleasure. They knew that if they spent it all, it was a long time until they got more.

Monthly allowances also helped train them for getting paychecks. Rarely does a job pay every week. Most jobs pay either monthly or bi-weekly. This is wonderful training for the real world in which they will need to budget their money.

How much to give

- Bottom line, don't pay too much. The appropriate amount is an amount that will cause your child to be thrifty and prudent. It is an amount that will teach them the wonderful things you want them to learn without teaching them negative things you don't want. Think about them being frugal and not being able to buy the latest video game or outfit. Think about them having enough to have fun but not enough to party every weekend and treat all their friends to the movies. If you aren't sure, err on the side of lower.

Here is our allowance rule. Each child gets $1.50 per year of age per month. So a 5-year old gets $7.50 a month. Plenty. A 10-year old gets $15. Again, plenty. Now if that is too strict for you to consider, you could use $2 per year. Again, remember it is enough to learn to manage and enjoy. Yet, not enough to meet all their needs. You want them to be highly motivated to work, remember?

Receiving an allowance is an important experience for our children. Doing so carefully will help them learn to manage their money well. That's an adult skill worth teaching and learning.

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