A Suze Orman exclusive

If it were up to me, I would disallow allowances. Or at least the version of allowances that are popular these days. When I ask young children why they get an allowance, they just shrug and tell me because their brother or sister does. Or because their parents give it to them. Folks, this is ridiculous. That’s simply not what an allowance should be about. An allowance is your first opportunity to teach your children to respect money—to teach them that money is something that must be earned.

So, for starters, I want you to ditch the word “allowance” and change it to salary. Yep, you read that right. Why not teach your kids the concept of earning money from work?

Here are some guidelines to help you think through your new salary strategy:

• The work determines the salary. I think it is backwards to tell your kid what their salary will be before they even do the work. Why not sit down at the end of each week and discuss what they think their salary should be, based on the work they actually did. It gives you both a chance to talk about what they did well, and what could be better.
  
  Just keep it simple when coming up with the chores. And try to make this a fun process; ask your son or daughter what jobs they think would be a great way to help out around the house. Folding laundry? Delivering the laundry to the right bedrooms? Setting the dinner table? You get the idea. This is not punishment. And keep the payout small for young children. A dollar or two a week is plenty for a young child.
  
  When you have a teenager you might also use the salary/chore conversation as an opportunity to introduce the concept of taxation. You can agree to pay more for their work, but you will also ask them to repay you 10 percent of their earnings to cover basic livings costs. Now of course 10 percent of their salary isn’t really going to cover much, but the idea here is to teach them what the real world is like.
  
  
• Pay on time every week. Make it a ritual. Saturday morning, Sunday night, Monday after school—whenever you decide, just make sure it’s a definite routine…exactly like a paycheck. And payment is only to be made if the chores were actually done. That said, with young children, don’t wait until the end of the week to tell them they won’t get their salary because they didn’t do the work. Check in during the week and encourage them to stick to the agreement, so you will be able to pay them. You want this to be a positive rather than a negative learning experience.
  
  
• Lengthen the payout period for teenagers. When your child hits 13 or 14, extend the payment period to once every two weeks. At 16 or so, switch to a monthly pay period. This requires your child to start managing their money over progressively longer time spans. The goal is to get them comfortable with budgeting over a month. The kids who don’t know how to budget and live within their means are usually the ones who end up saddled with thousands of dollars in credit card debt in college.
  
  
• Encourage employment. Look, when a 15-year old wants more and more money to feed a video game or high-fashion habit, the answer is not to increase their allowance/salary. It’s time for them to get a job. You will still keep paying them for the work they do around the house, but they are on the hook for all the goodies they want that go beyond their home salary.