Nicholas Dewsbury, 6, and his brother, Manny, 9, have individual styles when it comes to saving and spending their weekly allowance. The sibs, who live in Langley, B.C., get three dollars apiece. And while Manny tends to put the allowance away and forget about it, Nicholas will spend time examining and counting his cash. “He’s very organized and usually knows how much money he has,” says his dad, Jeff.
It’s not unusual for kids to treat allowance differently. But this age is a prime time to familiarize them with money, says Alberta-based financial expert Kelley Keehn. “This is the age where we want to start forming good money habits,” adds Keehn, who’s also author of The Prosperity Factor for Kids (Insomniac Press).
Thinking of introducing an allowance to your little millionaire-in-the making? Here are five tips to keep in mind.
1 READY OR NOT Is your child ready for an allowance? Yes — if your expectations aren’t high. Kids this age don’t yet understand the true value of money, says Jeffrey Derevensky, a professor of child psychology at Montreal’s McGill University. “If you ask a young child if he’d rather have a nickel or a dime, he’ll often say a nickel, because it’s bigger.” Six-year-olds also have trouble with delayed gratification, so the concept of saving is still beyond them. But with an allowance you can start to teach basic skills like how to add money together or make a simple purchase.
2 NO TIT FOR TAT Don’t dish out allowance in return for chores your child would be expected to do anyway, like making her bed or clearing her dishes. An allowance should be given with no strings attached. “Chores are basic duties for each member of the household. You shouldn’t get paid for them,” says Keehn. But if your daughter is itching to earn a bonus beyond her base allowance, let her help you clean up the garden or tidy the car for extra dough.
3 NO FINES FOR MISBEHAVIOUR Your son pushed his baby brother again? Consider cutting out dessert or TV time, but not allowance. “I really encourage parents to never withhold money as a punishment,” says Keehn. “There are so many issues about shame and money.” How often have you used the phrases “filthy rich,” “dirt poor,” or “dirty money”?
4 SHOW HIM THE MONEY Forget IOUs or cheques — give your kid cold, hard cash that he can handle and hoard. Money is more real to him if he can touch it, play with it and talk about it. “We are in such a cashless society,” says Keehn. “I don’t understand how kids can understand if they don’t physically see money.”
When it comes to how you should dole out his allowance, Derevensky says kids this age prefer to have eight quarters instead of one toonie because they think they have more. “That’s why young children get duped by older siblings who are willing to trade five dimes for a loonie,” he says. Keehn says she doesn’t think it matters which you give to them, but she adds, “It would be more fun to pay with various coins — for math purposes and also diversity.”
5 EXPECT TO EDUCATE Children will need your guidance on what to do with their windfall. You’ll have to show them how to balance spending and saving. Derevensky suggests looking at store flyers together and discussing how long it would take to save up enough for a certain toy. “You could also put a chart on the fridge and show how the allowance is adding up if the child doesn’t spend it,” he says.
Even though Toronto-based writer and mom Lisa Bendall is all grown up, she still enjoys playing with money.
Kids can learn much more than just finances from money.