Mid Rivers Newsmagazine 5-1-24

May 1, 2024
26 I BUSINESS SPOTLIGHT I MID RIVERS NEWSMAGAZINE
Tips for setting and paying children’s allowances from Neighbors Credit Union
A well-structured allowance
can teach children and teens
valuable money-management
and decision-making skills, as
well as the trade-offs for the
decisions they make. An allowance
also provides autonomy
to children and teens – encouraging
financial independence,
rather than relying on parents or
guardians for money.
There are three types of
allowance:
• Fixed or unconditional
allowance is a set amount at a
set interval given regardless
of circumstances (i.e.: $10 per week).
The benefit of this allowance approach
is that it provides children with a set
amount of money, making it easier
for them to budget and learn financial
skills. Plus, it separates the allowance
money from chores, teaching children
that chores and responsibilities are just
a part of life (and do not always come
with financial rewards).
• Rewards-based allowance rewards
children for completing household
chores such as cleaning the kitchen
or walking the dog or achieving other
objectives (earning a B+ average, for
instance). The benefits of this approach can
help teach children the importance of work
ethic and the consequences of neglecting
responsibilities.
• Hybrid allowance combines aspects of
a fixed and a rewards-based allowance.
When should you begin giving an
allowance? A general recommendation is
to begin giving an allowance between the
ages of 4 and 6. Of course, the right time
to give an allowance is when the child
is ready, as children develop at different
rates, especially if they have siblings. It’s
wise to start giving an allowance as soon
as the child can grasp financial concepts,
like counting.
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Is there an “ideal” allowance
amount? A commonly used rule of
thumb is giving children $1 to $2
per week for each year of their age.
An allowance should be enough
that it is meaningful and useful but
not so much that the child has more
than needed. The amount will vary
based on several factors, including
the child/teen’s age, financial
literacy level, what expenses the
child/teen has and what their parents/guardians
do not cover and
the parents/guardians’ goals for
providing an allowance.
Allowance tips:
• Set the amount and frequency upfront:
Let your child/teen know how much you’ll
give in allowance and when and be prepared
to stick to that schedule.
• Establish how (if anything) they will
be expected to spend their money. While
kids will learn the most by being able to
decide how to spend their money, you’ll
also likely still want to put some ground
rules or expectations in place.
• Consider digital options for teens with
cell phones. Transferring their allowance
to their account will get your teens used to
checking their balance and managing their
money digitally – a skill they’ll need as we
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become an increasingly cashless society,
introducing new methods of sending and
receiving money. When you pay an allowance
digitally, you can set it up to happen
automatically, so you never have to worry
about remembering to make the transaction.
• Allow your children to make mistakes
with their money. Resist the urge to
sweep in and “fix the mistake” by giving
them extra money. When this occurs, talk
through the decision, the consequences and
ways to avoid this from happening again.
• • •
The Neighbors Credit Union SMART
Program is designed to give young savers
a great financial foundation at every stage
of growing up through age 22. Visit neighborscu.org
or call 314-892-5400 for complete
details. Federally insured by NCUA.
Neighbors Credit Union serves all those
who live or work in St. Louis City, St.
Louis County, St. Charles County and Jefferson
County (MO) and Madison County,
Monroe County and St. Clair County (IL).
Neighbors Credit Union
4745 Mexico Road • St. Peters
314-892-5400 • Neighborscu.org
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• State-of-the-art office
• Locally owned and operated
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• Don’t have dental insurance?
Ask about our Dental Savings Plan.
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