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Should parents give kids allowances?
Yes. I would highly recommend it.
Here are a few reasons I think an allowance is a good idea:
If done intelligently, you can use this exercise to make them realize and understand the importance of money, and the importance of managing it. Divide their expenses into 2-3 categories:
- Mandatory or absolute must (things that you think are needed for them and you should take care of the expenses on those fronts. E.g. Education, basic necessities — food, clothing, etc.).
- Completely optional.
Then comes the completely optional part. It will cover a bunch of different segments — extra toys, games, clothes, gadgets, phone usage, etc. This is something that they are supposed to cover out of their allowance. So if they want something desperately, they have to let go of some other things to compensate for the additional expense. This will teach them to assign priority to their desires, and they won’t go spending money frivolously.
Make Them Feel Proud
Teach them to treat this money as their own. Gifts for their siblings and loved ones should be bought using this money, and they should feel great about the fact that the used their ‘own’ money instead of their parents’ money to buy something for others. Include some people they are quite close to, but not so obvious as a sibling — it can be their grandma, the babysitter, etc. It is a proud feeling to use money that is yours to buy a gift for someone that you had the option to spend on yourself.
I used to buy things for my mom once in a while. She would give me the money, and I would use it to buy a gift for her. It simply made me feel great. She tried her best to make me stop, but it felt so nice that I continued to buy her gifts with part of the money.
Inculcate Some Social Responsibility Into Them
No matter which strata of the society you belong to, there will always be people who are less privileged than you. And kids can be quite aware of this disparity. Encourage them to be compassionate about it, and not look down upon those who have less. If they want to help someone, encourage them to use their ‘own’ money to do so. Nothing inculcates compassion as effectively as spending your money on someone else with no expectations in return — simply for the desire to bring a smile to someone else’s face.
Growing up, my younger sister once wanted to send money, clothes, and food to earthquake victims using her own money. My parents encouraged her to pursue this desire, and then they contributed an equal amount from each of us in addition to the amount my sister had planned to give. She personally oversaw everything, got things organized, and made all the arrangements on her own. In every respect, she was the project manager for this small, but important task. I have never been more proud of her.
Inspire them to spend it wherever they want, but encourage them to discuss the plans with you to evaluate the merit of it. That way, you can show them the pros and cons of any decision they are about to make and help them figure out the right way for themselves. If they still insist on making a mistake, or do make a mistake, that’s okay. There are very few other ways to learn. Just make sure that you help them get back up every single time they stumble.