Money may not necessarily make the world go round, but it’s definitely a big dictator in this economy. As parents, it can be difficult to decide when to introduce monetary allowance. There is always the question of the right time to demystify the idea of money.
Financial planner Liz Frazier answers, “The earlier the better.” According to her, parents would do well to turn the abstract idea of value into something more concrete early in the game. This is to ensure that children effectively learn financial matters outside the hypothetical sense. Kindergarten, according to Frazier, is a good level to start on. This coincided with data from the Encyclopedia of Children’s Health, “By the time children are five or six years old, they may be responsible enough to handle small amounts of money.” But data provided by an online source is very different from real life. There are other factors such as location, social class, and other variables that may tip the scale.
To gain a closer-to-home perspective on the behavior of parents when it comes to giving allowances, we crowdsourced the Familywise Asia community and majority (69%) said that they started giving allowances when their children were in grade school. The rest stated that they think it’s more appropriate to start providing monetary allowance to older children. Around 27% responded that money should be given to children when they are in Junior High and around 4% stated that Senior High is the appropriate level.
There is a clear difference between what experts say and the responses we received. However, the data gathered matched with what local media network ABS-CBN News found, “A small group of parents when polled said children 8 years and older will start asking for money, but they were comfortable with responsible spending among children ages 12 and older.”
Foreign or western experts indicate that an earlier timeline in which to provide money is crucial, while in the Filipino context, a little later is deemed more appropriate. Whichever culture you belong to, the bottom-line is if the child has a grasp on the gravity of money, it’s time to educate them about it. It’s vital to teach children about finances in such a way that they’ll learn to have control over it and not the other way around.
- According to Frazier, it’s important to introduce early on the importance of saving, giving to charity and cashing out for personal expenses. Teach children to set aside a portion of their allowance on these three allotments: Save, Share and Spend. Aside from the concept of budgeting, proper values will be integrated into the child’s view of money.
- Establish guidelines with your children. Discuss what their allowance money covers. Be clear in stating the purpose, for example: Food money should be spent on food, not toys. This is because very young children may not be equipped to budget their allowance effectively.
- Set up goals to get them excited about saving. Financial matters are difficult enough to navigate for adults, let alone children. It may be helpful to celebrate saving milestones with your children through rewards or acknowledgements. By practicing this system, parents turn achievements into something tangible and achievable, which in hindsight can help motivate them.
- Monitor the frequency in which you give out your child’s allowance. As your child gets older, allow them more freedom and grant them more responsibility in handling their finances. By providing money weekly or bi-weekly, children will be able to practice budgeting and planning for their expenses. Although, this may not be appropriate to very young kids, because they may not have enough discipline to not spend all their money at once.
This is parallel to the responses we got from crowdsourcing in the community: the majority (60%) gave out allowances weekly and 30% preferred to provide allowances bi-monthly.
A healthy relationship with money is something that will benefit children well into their adulthood. What are your ways of establishing your children’s allowances and encouraging responsible financial habits?
Lotie Mercado is an Editorial Assistant at Familywise Asia. She loves literature, art and films.