Financial management is critical to your current wellness and future success. It all starts with education and information on managing your finances, and Altra Federal Credit Union can help.

Question: How do I set up an allowance system for my kids?

Answer: You’re past the debate of whether or not you should pay your child an allowance, and you’re now ready to start doing it. Deciding how much allowance to give is just one part. Setting up an allowance system that gets money into your kid’s hands so that they can self-discover the money goals and lessons you want to teach them is another. Below are four key decisions you need to make in order to set up an allowance system – whether you decide to give an allowance, pay for chores, or something else that works for your household.

Decision 1: Foundation of allowance

How is money “earned” or what is money given for? This is your first major decision in setting up your allowance system. Consider these options:

  • Basic allowance: A consistent amount of money is given every X number of days.
  • Learning-based: Money is awarded based on a child’s learning performance or efforts.
  • Chore-based: Money is earned from completing chores/tasks.
  • Project-based: Money is earned based on kid-initiated projects and ideas.

Decision 2: How often you want to pay

Next, figure out how often you’ll pay your child – weekly, bi-weekly, or monthly? Pick a consistent frequency and day of the week so your child knows what to expect.

Decision 3: Method of payment

Common payment options include cash, a written check your child can deposit, direct deposit to an account, prepaid gift cards or debit cards, chore/allowance tracking apps or other options. Your child will also need a space to accumulate and access their money, and this may help you decide what payment method to use. Contact your bank or credit union for options – they may offer free Money Jars (Give Save Spend Banks), youth accounts that earn cash back for making deposits, and more.

Decision 4: How much allowance to give

Ask yourself how you are expecting them to use this money. Are they just starting to learn basic give, save and spend habits? Do they have to cover responsibilities, needs or wants from it? If so, how much would you need to cover those amounts?

Ask them what they think they should get. This can give you some real money context from their world. You might discover they think $5 is a lot of money, or that their friend gets $25/week, or that $8/hour to babysit their siblings is just not cool.

Then, be ready to adjust if needed. Have your child reflect about what they did with their allowance, what didn’t work so well, and why. This conversation may create a great opportunity for your child to create a simple spending plan and learn how to budget. Check with your bank or credit union for free youth budgeting tools and apps for learning about finances!

Altra Federal Credit Union offers an array of financial tools and information to help you manage your money. For more, visit them online, visit one of their Clarksville locations – 1600 Madison St. or 2625 Wilma Rudolph Blvd. – or call 800-755-0055.

Brian Selph is the Retail Market president for Altra Federal Credit Union. Portions of this article are from Amanda L. Grossman’s “How to Give Your Child an Allowance (Create a Kid Money System That Works),” Money Prodigy, March 22, 2024. Content is for informational purposes only and is not intended as legal, tax or financial advice.