Parents use an allowance as a tool to teach their children about money and responsibility. Do the adults need one too?
An allowance is a pre-set small sum of money a child receives regularly to spend on toys, clothes, books, games, or whatever. The parent sets up payments, weekly, bi-weekly or monthly depending on the age of the child.
The concepts of saving and planning for purchases are valuable life skills to be learned by children and also needed by adults. A survey found that over 40% of American families spend more than they earn and nearly 50% have less than $ 10,000 in retirement savings. Your six year old may be better at saving money than you are.
To balance your spending plan is to do one of two things – spend less or make more.
Unfortunately, when people make more money, they sometimes spend more to maintain or increase their standard of living. They increase their debts rather than using the extra income to increase their savings/investments. This is not a recipe for financial well-being.
An allowance can be a tool to help you limit your discretionary spending. Give yourself an allowance (weekly, monthly or per pay period) and keep your spending within that allowance. You’ll find that it helps you reach your savings goals and build financial security. Children need limits so they can learn to make choices among a variety of spending options; we adults can also benefit from that same type of limit.