When it comes to giving children an allowance, you might believe that all experts agree it's the right thing to do—but that's not actually the case. Believe it or not, some experts believe that more damage can be done by giving allowance the wrong way than by not giving it at all.
To help you make the right choice when it comes to your own kids, we decided to ask one pro-allowance expert and one anti-allowance expert for their input.
Read their responses and see what you think.
The Stance: Pro-allowance
The Expert: Neale Godfrey, personal finance expert and author of 27 books and financial literacy lessons for kids
CREDIT.COM: For starters, what would you say the main goal of giving an allowance should be?
GODFREY: Kids need to learn the natural consequences of money and that the only way you get money is to earn it. So that's the first part of why allowance is important—understanding that the way you get money is to earn it. The other part is about teaching them to budget.
CREDIT.COM: How do you suggest parents go about setting up an allowance system?
GODFREY: I recommend setting up two types of chores in your house: citizen-of-the-household chores and work-for-pay chores. Kids don't get paid for citizen-of-the-household chores. These are just meant to teach your kids to be good citizens of the house, and hopefully later of their communities. For example, in our house we recycled and my kids kept their rooms clean, and they didn't get paid for those. On the other hand, work-for-pay, to me, are things like setting the table, loading the dishwasher, dusting, vacuuming, and doing laundry. But you are the CEO of your household, so you decide what are citizen of the household chores and what are work-for-pay chores.
CREDIT.COM: Where does the budget part come into play?
GODFREY: Parents should make this very visual and give young kids four clear plastic envelopes or jars to divide their money into. They can teach them that 10% comes off the top for charity and then divide the rest into thirds. The first 1/3 is quick cash (so you teach that if you work hard, it's okay to spend a little bit of your money on things you want), the next 1/3 is medium-term savings (help them pick something to save for), and the last 1/3 is long-term savings. Parents should go to a bank and open an account and teach their kids about how real money goes into that.
CREDIT.COM: Any final thoughts when it comes to allowance?
GODFREY: Talking to your kids about allowance and money is just as important as giving it. I don't support an entitlement program, but I believe you should give a set amount each week for chores so you can begin to teach them how to use it.