Question: When is it too young to give allowance? When is it too old to give allowance? When should they start paying for their own things?
Answer: I just love this question. Not only do I have a financial background, but being a parent and watching kids with their own money is really cool.
I think it's never too young to start teaching your kids about money. My mother-in-law gives the kids a gift card with money on it, and they think it's the coolest thing. At 5 years old, my stepdaughter would carry it around and call it her credit card and couldn't wait to use it.
Even at 5 years old, giving a dollar every week for cleaning their room will not only keep their room clean, but it starts teaching them about money. Will they save it? Will they spend it right away?
If your kids are anything like my brother, he NEVER spent his allowance. He hoarded it until he had enough to buy what he wanted. He would ask, “How much is the telescope? It's $50? OK, I'll wait.” He would count his quarters and dollars. As he got older, he would mow the neighbor’s lawn to get extra.
As kids get older, the question is: When do we stop and let them get a job? Well, first, as kids are getting older, you can give them more chores to do and pay them for doing their chores. Once they are old enough to babysit or get a job, then that should take over for allowance.
Having a part-time job will teach kids a lot about responsibility, punctuality and so forth. They will get a check for how hard they worked. But, how do they spend that? It's more than Mom and Dad's allowance!
Here's the goal: to teach kids how to become responsible with money and not to lean on credit cards. They need to be able to pay bills as well. I'm not talking about helping out with your mortgage; I'm talking about their cellphones, or a portion of the car insurance on the car they are driving.
Having kids pay for part of what they are using shows them how to pay bills and how to budget. If I have $100, and $50 goes to the cellphone, that leaves me $50. Or, I want to go on a trip with my friends, and it will cost $300—how many weeks will it take to save that amount?
All these things teach kids good money techniques early. I remember going to college and getting bombarded with credit card offers. They would even address me with, “Do you have enough money for all your books?” Kids who don't know how money works will fall into traps.
So I say, start as young as you can! Give them a list of things they have to do for the money, even as they get older. My mom had me sit down with her when she did the bills when I hit my teens. It taught me a lot about budgeting.
Don't be afraid to start saying, “I am not going to pay for this anymore; it is now your responsibility.”