The average American allowance is $15 per week for children, but the majority of that money isn’t saved – it’s spent as soon as it hits the hand of the child. It begs the question – what is the best way to handle an allowance for your children? Is a regular allowance even the best option?

We live in a creative time, and this is reflected in how we dole out allowances. With these creative approaches come some ideas about ways to teach your child the true value of money – including savings.

“Earning” Allowance

A large school of thought on allowances states that you shouldn’t just give your kids money. They should earn it. This is simple enough, and is approached in a few different ways. One way is to give your child a particular list of chores for the week. If the chores are all finished correctly, allowance is paid out. If a day or two is missed, the allowance may be limited or cut back a bit to reflect that.

Another way to teach your child more about the power of earning is to avoid more than just a few basic tasks in a day as regular activities. Make all of the other chores in the house and yard work tasks that earn a particular amount of money.

Mowing the yard might be worth $10 for example. Emptying the dishwasher is worth about 50 cents. Keep track of the chores using clothespins or magnets – the children just move the item to their “section” of the chart to show that they have “earned” that money. Then you can just pay your child at the end of the day. If your child has his eye on something special, he can simply “work overtime” to get the money to earn it.

Instant Savings

Another option to help your children understand the basics of spending and saving is to open an account online. Rather than handing your child his $10 every week, hand him $8 and deposit $2 into his savings account. Or take half of his weekly allowance and put it into savings for him. It may be difficult at first, but once the savings start to grow, your child will become increasingly enthusiastic about the power of his new found wealth and be able to save for a rainy day or a large future purchase he’s excited about.

If you want to make savings more visible for your child, you’ll need to find some time to gather cash every week, but give your child his allowance in one dollar bills. Then, at home, sort out two jars – one for spending and one for saving. Your child will put his “savings” dollars into his jar where he can literally watch his money increase every week in front of him. The spending money may come and go, but there will always be a reserve your child can enjoy seeing every day.

Going Digital

Another option for your children is to avoid cash at all and go entirely digital. Minors can’t open their own checking or savings account, but they can be put on a parent’s account. Check with your bank to see if you can set up an account on your child’s behalf. You may want this linked to your own account, or you may choose to set up a separate account for older children so that your account details aren’t shared between accounts.

Once you have your account opened and ready for your child’s use, simple deposit his or her allowance into the account every week – much like your check is direct deposited. There are many good lessons that come from electronic accounts including how to navigate through an online banking website and how to handle electronic payments and money.

It will also help your children to have electronic money rather than cash around the house. Electronic funds are generally safer from the new puppy or the washing machine, and when money isn’t right in front of your face, it’s a bit harder to spend it on impulse purchases. Of course, this is coupled with the invisible power of electronic funds – your child will need to learn how to manage his account to avoid overdrafts, of course.

Prepaid Accounts

Finally, a good option for older children learning to manage credit and electronic funds is a prepaid card. These cards are loaded up by parents on a regular basis and then the child can swipe the card just like a credit card and use it for any number of purchases. If you’re going to try using a prepaid account for your child’s allowance check to see what sort of fees are included for the card’s use and the recharging. If you’re paying $3 to put $10 on the card each week, you’re not spending wisely – and that’s not a great example to be setting for your child.

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