It’s one thing to teach your kids the difference between wants and needs, or what credit cards are, but helping them to develop good money habits is about practice, practice, practice. Just like all those piano lessons and soccer games, giving kids the opportunity to try and try again with money through a weekly or monthly allowance will help them learn how to plan, build stronger skills, and gain confidence. So, if you’re not giving them an allowance already, it just might be the time to start!
There are varying opinions on allowances, with a list of pros and cons and different ways of what “doing it right” could mean for you. While only you can decide what’s best for your family, we at Verity believe that giving kids an allowance is the best way for them to learn how to manage their money.
Share your family values
Before you start giving them their own money for them to run off and spend, have a conversation about your family values. What is important to you as a family? Is ‘giving’ a value you want to make sure they adopt? How important is ‘saving’? Are experiences more important to you than material goods?
And if there is anything specific that you don’t want them to spend on - like candy or junk food - be clear about the consequences of doing so.
Guide your children on how to manage their money
By the time children can add and subtract, they have already picked up basic money concepts – especially that it’s you who pays for their stuff!
An allowance is a great tool to teach them how to spend, save and give.
Spending will come very easily for most, but they’ll need guidance and encouragement with the other two. And if you give them an allowance digitally, it will be easier for you to understand what they're doing with the money for you to guide them.
Don’t be afraid to let them make mistakes
Spending freely in a controlled environment with your oversight while the stakes are relatively low can be used as a teachable moment. And if they haven’t saved enough for a planned outing, let them experience the weight of missing out – do your best to not give in to their pleas!
To start, guide them on how to manage their money. As an example: if your child gets AED 100 a week, AED 50 goes for spending, AED 30 for saving, and AED 20 for giving. With time, give them more ownership on deciding how much they want to allocate to each of these actions, especially as they grow up.
Make sure they understand wants vs. needs
Any parent who’s survived a trip to the store with their kids knows the whining and begging that happens when they see something they just “NEED” to have. With an allowance, kids begin to learn how to pay for things on their own and start realizing their actual value and how long it may take to save towards something. It can also help them discern the difference between a real need (such as new shoes when they’ve outgrown theirs), and a want (such as V-Bucks for Fortnite or shopping on Amazon).
Make sure your kids are clear on what needs you will provide for (such as food, housing, education, clothing) and what the added perks they are responsible for (maybe activity fees, toys, games, movies, or music).
To chore or not to chore, that is the question
There is some division among parents and experts about tying tasks or chores to an allowance: Those in favor believe that kids can connect hard work with earning money and developing a strong work ethic; those who don’t favor it say that kids should learn to be responsible for doing things like tidying up and making their bed without any expectation of getting something in return.
We suggest giving your child an allowance for them to manage, in addition to rewarding them for tasks and chores that go beyond what you expect of them as a family member.
For example, making their bed might be something you expect, but washing dishes is going beyond.
Create a list of age-appropriate chores that each person can do as a contribution to the family and an additional list of “going above and beyond” tasks, like organizing a closet or babysitting a younger sibling, that can help kids earn extra money.
Regardless of which camp you come from, kids should get a full explanation of why you’re giving them an allowance, what your expectations are, and what, if anything, could change the amount they receive if it's not a set allowance.
Don’t just give money—talk about money
Remember that even though your kids learn a lot through experience, they will learn even more from direct conversations with you. Don’t miss out on teachable moments due to fear or uncertainty! You don’t need to schedule time for a talk—just involve your kids in everyday activities like making a grocery list, shopping, planning for vacations and paying bills. At the very least, let them see that you do these things too, and think out loud how you make your decisions.
The amount you give your kids as an allowance is far less important than the way you structure it. Giving children an allowance allows them to have real-life money experiences to learn from. Consider your own family’s budget, how many kids you’ll be giving an allowance to, and what you expec