Should you give your child an allowance during hard times? If you can spare the money--yes. Or, perhaps you can cut back on something since an allowance may teach a lifelong money saving habit. Giving an allowance to children is a good way to teach them how to handle money and to appreciate a budget. It is never too early teach your child money management.
How can you make your child appreciate the value of a dollar? Explaining the consequences of making rash purchases, or overspending is very effective. The first thing a parent or parents must do is to decide how much the allowance will be and how often it will be given. A weekly allowance is ideal, perhaps Monday rather than Friday, since Monday is usually the beginning of a regular work week. The reason for this is two-fold, kids will better understand that this money must last through the week and the coming weekend, and they will be less likely to overspend during the week if they need money for the mall on Saturday.
How much should the allowance be? It should never more than you can readily afford, however, it must be a reasonable and practical amount. Discussing this issue with your child makes sense. Some things to consider:
Lunch: Is it taken to school or bought once there?
School supplies: Is the child expected to buy small necessities such as pencils or notebooks?
Snacks: Is there a school break when kids are allowed to buy chips, etc.?
After school snacks: Does your child stop by a sweet shop with friends after school?
Saving Is the child expected to bank a certain amount of his allowance?
Permissions: Will you allow your child to make a large purchase with his allowance? What if it is something you don't approve of? Will you set limits on specific purchasing? If so discuss it beforehand.
If your child makes a mistake and overspends or makes a bad purchase, do not punish him. Sit down and talk about the mistake. Do not take away allowance as punishment for an unrelated incident; do not threaten to withhold allowance because of incomplete chores or chores done poorly. Allowance and chores must be separate issues.
With proper guidance giving a child an allowance will teach good saving habits and goal setting.
Personal finance coach Suze Orman has a timely new book titled Suze Orman's 2009 Action Plan available from Amazon and other sources.