At its most basic an allowance is an incredibly useful tool to help teach your child about finances. By putting “their own” money in a child’s hands, you engage them in the learning process on a level that no other method will. Your child can truly practice and experience financial concepts.
Try a weekly allowance of roughly a dollar per year. Age 10 could be a good starting place. This is key: when you go to the store and your child wants a new toy or a fancy pair of sneakers or a pair of earrings, that now becomes a choice for them instead of just something they beg Mom and Dad for.
If their allowance is spent, then they need to wait and save. Try to stand firm. If you always give in your child will not learn about tradeoffs and they won’t be encouraged to practice budgeting or saving. What they will learn is how to ask you for more money- WECU does not recommend this!
Allowance provides other opportunities to lay good financial groundwork. Use it to introduce your child to the three piggy bank system: saving, spending, and sharing. In the early years, you may choose to enforce good savings habits by encouraging your child to save a certain amount of their allowance every week (say $4). Helping your child create a savings goal gives you a chance to work together and shows them the impacts of saving.
