Study after study shows that the earlier we introduce our children to certain topics about money, the more likely they are to make smart financial choices as adults. Many parents choose to give their children a modest amount of money, or an allowance, to help them learn about managing their own finances.
An allowance can help a young person realize that they cannot buy everything they want. By providing kids with their own funds to manage, you can help them learn to budget, save, and make smart spending decisions.
Things have changed since you were a kid. It’s different for kids today to learn the value of a dollar. Various cash apps and digital purchases make money less tangible. Here are a few tips to help you manage allowances in the digital age.
Allowance Best Practices
There are several strategies for giving your child an allowance, as well as pros and cons to each method. The key is to keep it simple, manage expectations, and communicate the “why” behind your decision. Here are a few ways you can give your child an allowance.
The regular allowance is a consistent amount of money you give to your child. Whether you choose to give them the money weekly or monthly, the amount is the same and is unconditional on other factors.
Some experts say this is a great way to help children plan ahead and think about budgeting. Others argue that children ultimately view this as an entitlement that can negatively impact the way they view money.
Allowance When Needed
This is when parents give their children money only when it’s needed and when the child asks for it. As the parent, it’s up to you to decide how necessary the purchase is and whether or not you have the budget allocated for the child.
According to some experts, this is a good strategy for teaching kids to be smart about money. They believe that requiring kids to ask for the money forces them to think it through and therefore improves their overall financial literacy. On the other hand, some say that they don’t learn enough about budgeting and saving because in this case Mom and Dad are doing the thinking for them.
Allowance Tied to Chores
Many parents will tie their child’s allowance to chores they are expected to help with around the house.
Supporters of this strategy say that it helps children make the connection between work and play. And that kids will have to understand that in order to purchase something they want, they’ll have to put in the work. However, some experts suggest that this could lead to bargaining over helping out around the house. And that if a child doesn’t need money, he or she may be less willing to complete their household duties.
Allowance Tied to Grades
Another popular method for gauging allowances is for parents to tie them to the child’s grades at school. Many money experts say this is a great way to encourage children to do their best at school, which could positively impact their future. The only real problem here is that parents must set clear expectations and decide when it’s necessary to raise the bar.
Tools to Help You
No matter which option works best for your family, Peoples Bank has the tools you need to manage allowances in the digital age.
Simply Free Checking
Our Simply Free Checking accounts are easy to open. All you need is a starting balance of $50. From there, you’ll receive a Visa debit card, pay no monthly service fees, and require no minimum balance. You can establish account alerts with Peoples Bank to notify you about suspicious activity or balances below an established threshold.
Worried about overdraft fees? Use these tips to teach your young one about managing their account.
Youth Savings Account
You can also bring your child to Peoples Bank to open a Youth Savings Account. These special savings accounts are for children under 18 years of age. There are no monthly fees and no minimum balance requirements. Once the minor turns 18, this account changes to a Regular Savings Account.
Online Banking Portal
Peoples Bank also offers the convenience and security of an online banking portal. You can add your child’s Peoples Bank accounts to your personal online portal to monitor and control activity with accurate, up-to-date information whether you are at home, work, or out of town.
And, through our online banking service, you and your child have access to the following:
- Online Bill Pay
- Mobile App
- Mobile Check Deposit (for those birthday cards from Grandma & Grandpa)
- Electronic Statements
Peoples Bank also offers person-to-person (P2P) payments for your convenience. With P2P payments, you can easily manage your child’s allowance and send money directly from our mobile app.
To learn more about managing allowances in the digital age and the tools available at Peoples Bank, reach out to your local branch!