It pays to be a kid.
The majority of children receive an allowance. And the average allowance provides a child enough money in a year to afford an Apple iPad and three Kindles – and still have money leftover, according to a recent national survey conducted for the American Institute of CPAs by Harris Interactive.
The amount varies by age, but the average allowance totals $65 a month, or $780 a year, the survey found. The recipients have plenty of freedom with their allowance, with only 1 percent of kids saving any of it.
Cindy Hilkin, a mom and loan consultant at Dupaco, is among the 61 percent of parents who pay an allowance to their children. But it's on a smaller scale at the Hilkin household: a quarter a day, IF the children's daily chore lists are completed.
The age-appropriate chore chart lists everything from "make your bed" to "brush your teeth" to "read a book." At the end of the day, if all of the chores were done, the children receive a quarter. Every other month, the kids deposit their money into their separate savings accounts and, as a reward, keep $5 of their allowance for shopping.
"It's a very easy way to address what needs to get done in our home – simple, basic things that every child should do," Hilkin says. "Their rooms are beautiful because they know if it's not clean they won't get their quarter."
While every family's allowance practice is unique, here are three common pitfalls to avoid:
- Giving too much in the beginning. Determine ahead of time what your family can afford and what your child will be expected to pay for with the allowance. Start with a small amount. "It's all trial and error when you start," Hilkin says.
- Giving away free money. "You have to teach responsibility. There should be some chore or task associated with the allowance so they're not being given free money," Hilkin says. "Otherwise, you're teaching that they're entitled to that money."
- Not teaching financial sense along with the cents. "You have to teach them what to do with that allowance once they do acquire some money," Hilkin says. "Some of it should be saved for the future, and some of it should be set aside for some reward today."
By Emily Kittle