Smart Strategies for Paying Your Child an Allowance

By giving your kids money to spend and save, you'll help them sharpen their financial skills at an early age.

- FAMILY FINANCES BY ELLA VINCENT

THE practice of parents paying their kids an allowance is still going strong. A recent Wells Fargo survey found that 71% of parents who have children between the ages of 5 and 17 give them an allowance, averaging $37 a week. However, about half of parents who responded to the survey struggle to discuss money in a way their children will understand.

Offering your kids an allowance can be a great way to teach them financial responsibility and introduce conversations about spending and saving money. If you have kids at home, consider these ideas to set an allowance strategy.

Establish guidelines for earning it. A key decision is whether you will link your child's allowance to household chores or other tasks, which can help kids understand the relationship between money and work. Some parents feel that everyday chores, such as making the bed or washing the dishes, are part of a child’s responsibilities as a family member and shouldn't come with a financial reward. Alternatively, you could pay your child for performing tasks that go beyond daily expectations.

Kate Hamilton, entrepreneur and author of The Imperfect Parent, suggests that starting at the age of 5, your children could take on extra weekly tasks, such as raking leaves in the yard. To help kids learn about how they would be compensated in the workplace, she says that you could offer them a fixed rate for performing tasks—say, $10 an hour for two hours of doing laundry and washing your car.