Teaching kids about money can be tricky, but it's one of the most important lessons they'll ever learn. Giving your child an allowance is a great way to help them understand the value of money and start building good spending habits from a young age – especially when they have the right tools, like our eXtras Student Checking account!
At Apple Federal Credit Union, we're all about empowering our community with financial know-how, and that starts with our youngest members. Here are some insights and tips on how you can use allowances to instill good financial habits in your kids.
Understanding the Average Kid's Allowance
When you make the decision to start giving your child an allowance, it helps to know how other families are doing it. Thanks to T. Rowe Price's 14th Annual Parents, Kids & Money Survey, we can understand how average families go about giving their children allowances.
According to the survey, parents give allowances for various reasons. The primary reason, reported by 59% of parents, is to teach the importance of earning money. Another 35% of parents believe that allowances help children manage money effectively.
Among parents who pay their kids an allowance, 64% said they require their kids to earn it by doing chores, while 16% said they didn't expect their kids to earn their allowance.
The amount of allowance children receive can vary significantly. Here's a breakdown of how much kids typically receive on a weekly basis:
- $5 or less: 13%
- $6 to $10: 22%
- $11 to $20: 35%
- $21 to $50: 24%
- $51 or more: 6%
These figures highlight the diversity in how families approach allowances. Depending on your financial situation and parenting philosophy, you can choose to approach your child's allowance however you see appropriate.
4 Benefits of Giving Kids an Allowance
Giving kids an allowance isn't just about handing over some cash each week; it's about teaching them valuable life skills that will benefit them well into adulthood. Here are four key benefits of giving your children an allowance:
Teaches Kids Financial Literacy
One of the biggest advantages of giving an allowance is that it helps kids learn about money management early on. They get to experience budgeting, saving and making spending decisions firsthand. This practical experience lays the groundwork for a lifetime of good financial habits and helps demystify the world of money.
Encourages Saving Habits
Introducing your children to the concept of saving is crucial, especially considering many adults struggle to maintain an emergency fund. By setting aside a portion of their allowance regularly, kids learn the importance of saving for future needs and goals. This habit of putting money away for a rainy day can significantly impact their financial stability as they grow older.
Promotes Financial Independence
Managing their own money gives children a sense of independence and responsibility. They learn to make decisions about spending and saving, which prepares them for financial independence in adulthood. This experience can build their confidence in handling money and making informed financial choices.
Develops a Sense of Responsibility
Linking allowances to chores or specific tasks teaches children that money is earned through effort and hard work. This connection between work and reward helps them understand the value of money and instills a sense of responsibility. It also encourages a strong work ethic as they see the tangible results of their efforts.
How to Set an Allowance for Kids
There are several strategies for determining how much allowance to give, each with its own educational benefits.
One popular method is the age-based rule, which involves giving $1 to $2 per week for each year of the child's age. For instance, a 10-year-old would receive between $10 and $20 per week, aligning the allowance with their growing responsibilities and needs.
Another common strategy is chore-based allowances, where the amount given is tied to the completion of specific chores. This approach teaches children that money is earned through effort and work.
Finally, some parents choose to use a goals-based strategy. A goals-based strategy involves setting an allowance amount to help children reach specific financial goals, such as saving for a new toy or a special outing. This method helps teach kids the value of planning and delayed gratification.
Practical Tools for Managing an Allowance
When it comes to managing an allowance, having the right tools can make all the difference. At Apple FCU, we offer exclusive products to members 23 years old and younger designed to help your kids build strong financial habits.
eXtras Student Savings
As your child begins to receive an allowance, they'll need a secure place to put their money. Our eXtras Student Savings account is perfect for kids ages 0 to 23, making it a versatile option for all stages of their financial development. Parents have complete access to the account as joint owners, ensuring you can help manage and guide your child's savings.
eXtras Student Checking
The eXtras Student Checking account lays a solid foundation for money management for youth aged 12-23. This account features low to no fees and includes a FREE Visa® Debit Card, making it easy for your kids to manage their spending.
12-Month Starter Certificate
In addition to an eXtras Student Savings account, Certificates are an exceptional tool for teaching kids the value of investments and delayed gratification.
Our 12-Month Starter Certificate can be opened with just $50 and offers a fantastic way to introduce your children to the concept of earning dividends and understanding Annual Percentage Yield (APY).
You can add funds at any time and earn competitive rates on savings up to $5,000. It's an excellent way to show your kids how their money can grow over time through smart investments.
Giving kids an allowance is a powerful tool for teaching them about money. It not only equips them with essential financial skills but also fosters independence and responsibility, setting them up for future success.
At Apple FCU, we're here to support you and your family on this journey. By utilizing our student-exclusive products, you can provide your children with the practical tools they need to manage their allowance effectively. These products are designed to help your kids learn how to save, budget and invest, giving them a solid foundation in financial literacy.
Starting an allowance system is a great way to introduce your children to the world of money management. With Apple FCU by your side, you can ensure your children develop strong financial habits that will benefit them for years to come.
