The subject of giving kids an allowance is a sensitive one with most parents—everyone I’ve ever met has an opinion, either about how much or on what basis it’s given. Or, there’s the questions of whether to give an allowance at all.

As a parent of two adult children and in my 20 years of experience helping families build wealth, I’ve seen first hand how allowance can be an effective way to teach kids lessons in money management at an age where they can make mistakes and the consequences aren’t dire. But, I’ve also seen how it can reinforce and reward the wrong behaviours. Here are a few tips I offer members who come to me seeking advice on the subject.

Don’t make it too much

Whether you tie allowance to chores or a figure based on age, make the amount reasonable to help teach your child the value of money. If you compensate too much for too little (like paying $20 for just the chore of vacuuming) you may not be teaching the lesson that earning money takes a lot of effort and time. As kids get older, too large an amount may even act as a disincentive to getting a part time job. Too small an amount, however, may be seen as not worth the effort.

Do not pay in advance—unless it’s a repayable loan

By advancing your kids an allowance, you are just reinforcing the cycle of debt that currently plagues the majority of Canadians. Instead, saving for goals in advance provides the opportunity to talk to your kids about different wants and needs and how much time is required to attain them.

Having said that, loaning your child money and having them repay every last dollar—with interest—will give them an understanding of how credit works.

Don’t think small

A fundamental concept of sound financial management at any age is saving up for a long-term goal. Often with kids, we focus our lessons on small discretionary spending like saving for toys or treats. Instead, using bigger ticket goals—like a wakeboard or summer hockey camp—as the focus for their savings teaches them something more significant: how much savings can add up over time and that knowing what you are saving for actually makes it easier to save.

Do encourage entrepreneurial behaviour

As more and more of the B.C. workforce is self-employed, developing entrepreneurial skills in your children early on can pay off big time in the future. Encourage your kids to think of creative ways to earn money. Paper routes, collecting recycling, dog walking or lawn-mowing will teach kids that the more work they do, the more they will earn. It also teaches them how to promote themselves and their skills to others—an invaluable life lesson.

Regardless of where you are in the child-rearing process, it’s never too early or too late to sit down with your financial advisor and talk about your family’s financial plan and how you will meet your long term savings goals—together.

Jay Christensen is a senior wealth advisor at Valley First, a division of First West Credit Union, in Kelowna. Visit ValleyFirst.com for more information.