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How to Do Allowance Right: Tips From Financial Experts and Parents
  • Money may not make the world go round, but it does pay to know how to manage it well. And it's why providing money lessons for your kids early lays a strong foundation to have a healthy attitude when it comes to financial matters. For most parents, the lesson begins when she thinks her child is ready to receive an allowance, usually made on the occasion of his entry to big school. Keep these tips in mind if you think your child is ready.

    1. Do computations before deciding how much to give your child.
    “Make sure that the allowance is just right for your child’s needs,” says Aneth Ng-Lim of Citibank. “Don’t give too little that he can’t buy the right kind of food he needs, or give too much that he ends up with more than enough funds. This will only tempt him to spend it on unnecessary things like candies and junk food.” 

    Don’t forget to say what the money is for too. Lim adds, “I encourage parents to hand out money advice along with the allowance. It’s important to let your child know what the allowance is for - say, for lunch or merienda, not for toys or candies that are also sold in the school canteen.”

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    2. Give allowance enough for the whole week.
    It teaches your child self-control and how to distinguish between needs and wants. Anna Mae Tuazon, a registered financial planner, says, “A weekly allowance will teach children how to budget and will reduce their temptation to spend on unnecessary things. However, if the child is still not ready to budget, the parent may opt to begin with a daily allowance, then a bi-weekly allowance, then progress to a weekly allowance.” 

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    3. Teach your child to be an automatic saver.
    Former investment banker now money management coach Rose Fres Fausto says she taught her three boys to set aside money for savings immediately after they got their allowance. “You already set aside the 20 percent before expenses, not after,” she says. So, if your child gets Php100 on Sunday night for his weekly allowance, he should already place the Php20 in his savings even before he spends anything on Monday. 

    Says Lim, “You can motivate your kids on the rewards of saving. If they set aside a portion of their allowance every day, they would have enough money after a week or two to buy a book or something they like. Later on, they will discover that saving is a reward in itself.”

    4. Consider giving an allowance even if your child has lunch baon.
    Magnolia Alano, a financial planner, says that even if your child brings baon to school every day, you can still give him enough allowance “for emergency.” Doing so could help strengthen your child’s ability to make important spending decisions (“When should I use this money?”) and take responsibility for his actions. 

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    5. Try a “hulugan” scheme.
    When both her kids, Mark, 14, and Mika, 10, wanted new phones, entrepreneur mom Michelle Mangahas told them that they had to pay for it themselves. Because they didn’t have enough in their savings yet, she implemented a “hulugan” scheme at home for her kids “wants.” 

    Their mom bought them the phones, but they would have to pay her in installment. At the end of each week, whatever was left of the kids’ baon would go to their phone “hulugan.” Says the mom, “As of today, Mika only has Php1,100 left to pay; Mark still has Php5,100 to go. 

    “They didn't complain at all. They think na it was a favor kaysa naman mag-ipon sila at saka pa lang bibili. Now they can enjoy their phones already,” she shares. “Although kaya ko naman sila bigyan, sinasabi ko sa kanila na ang daloy ng pera walang kasiguraduhan. Kailangan mag-ready sa posibleng panahon na walang gaanong income.”

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