Allowances can teach sound money values while the stakes are low

Inflation that has skyrocketed from 4 percent in 1976 to 12 percent in 1980 is putting the bite on parents and children. Even the tooth fairy has upped the ante from a dime to a quarter in an economy in which a dollar doesn't buy much and a dime is good only for a parking meter.

Hard-pressed parents are under the gun from the start to teach their children sound money values in an era in which budgeting and saving for a rainy day are out of step with the media message of spend now, pay later. The allowance is still the basic teaching tool in most families.

An allowance should start as soon as a child has needs for recreation and treats, and should cover savings, according to Don Dinkmeyer, a member of the White House Conference on Children and author of "How to Raise a Responsible Child." At a third grade level, he recommends enough money for a lunch ticket and school supplies and savings.

But what should a parent to if a child blows the whole wad on a model of Luke the Skywalker, from "The Empire Strikes Back"? Allow him the consequences of his free spending, says Dr. Dinkmeyer. He'll remember the week he had to bag his lunch or go without other activities. Children will be spendthrifts at times. That's how they learn.

The decisionmaking, priority-setting, and investing of adult life begin with the allowance, when a child must choose between gum balls or a candy bar, a water pistol or saving two allowances for a better toy. The stakes may be higher, but the process remains the same, according to Pam Lobb, guidance counselor at the Paoli Elementary School in Pennsylvania.

There are three allowance patterns: the "no strings" approach; an allowance in which certain amounts are specified for church and savings; or the allowance in exchange for chores. Dr. Dinkmeyer prefers the "no strings" approach because the others produce new problems. A specified allowance defeats learning by setting up a battleground between parent and child when the money is misspent.

Those disliked household chores may be done a lot quicker if you pay for them , but Dr. Dinkmeyer believes that parent and child will pay a higher price later on for taking the easy way out. When a child is paid for work, he develops a "what's in it for me?" attitude and undertakes work solely in terms of money, not obligation.

Children have a right to share in the family responsibilities. It they are paid for things they should be expected to do as contributing members of the family, they may develop distorted values concerning money and responsibility.

"Allowance is a learning experience, not a privilege at our home," says Kay Bordonna. She gives her 13-year-old daughter, Jennifer, $3 a week and 12 -year-old son, Jim, $2.50. The Bordonnas believe that everybody spends money differently and makes mistakes with money. They want their children to learn now, not later.

Two-fifty is the going rate for jobs around the house at the Henry Wessells home. "We believe in keeping the kids poor and not competing with the minimum wage. That is their incentive to work outside of the home. Home is only the first step in our sons' working life," says Nancy Wessells.

Not everybody believes in allowances. Some parents let their children earn all their money.

Earning spending money teaches that possessions and entertainment cost money, and money comes from work, not parents. A quick dose of cash may earn you a hug , but that hug was bought. Some observers maintain that a parent will feel better if his child comes to Mom when he is 25 with a promotion, and thanks her for teaching him how to work.

There may be differences of opinion on the allowance, but experts and parents agree on the importance of encouraging savings. The Wessells gave each of their four sons a $5 savings account when they were little so the bank, not the pocket , would be the repository for birthday and Christmas money. They insisted on passbooks so the children could see each transaction. Several hoard and save, and the others squander, regret, and learn. Mrs. Wessells echoes Kay Bordonna when she says she'd rather have her children learn now when the stakes are low.