Allowance (money)

Allowance (money)

An allowance is an amount of money set aside for a designated purpose.

Because money is ever a scarce and valuable commodity, the general concept of one person who has the authority to decide what to spend it on (that is, who has "the power of the purse") allowing another person to have some (for whatever reason) is often referred to as an "allowance;" some specific examples follow.

Types of allowance

A child's allowance

A child's allowance or pocket money is a small sum of money periodically given to a child by his/her parents, typically on a weekly or monthly basis. Their parents "allow" them a fixed amount of money within a given period of time. Often parents demand that certain tasks (such as cleaning or sharing) be done as a condition of receiving the allowance, in an attempt to teach the child about responsibility. Parents might also give less or no money if the child's behavior does not meet their standards. A child's allowance also has the benefit of teaching a child money management skills. [ Money Management for Kids] ] .

There are many types of allowances: 1) allowances for chores, 2) allowances for grades, 3) allowances just because, 4) the Ultimate Allowance, which is when parents take the money they spend on their children in terms of raising them and run it through the kids instead. The goal of this type of allowance is to prepare the child to be 100% responsible for themselves by the time they move out of the house.

All forms of allowance are generally provided to the child in order to teach them about money. Some forms work much better than other forms. [ The Ultimate Allowance Book by Elisabeth Donati ] ] .

Allowances in business

Construction contracting

In construction, an allowance is an amount specified and included in the construction contract (or specifications) for a certain item of work (e.g., appliances, lighting, etc.) whose details are not yet determined at the time of contracting. Typically:
# the allowance amount covers the cost of the contractor's material/equipment delivered to the project plus all taxes less any trade discounts to which the contractor may be entitled with respect to the item of work;
# the contractor's costs for labor (installation), overhead, profit and other expenses with respect to the allowance item are included in the base contract amount but not in the allowance amount;
# if the section 1 costs for the item of work are higher (or lower) than the allowance amount, the base contract amount should be increased (decreased) by the difference in the two amounts and by the change (if any) to the contractor's costs under section 2.

The allowance provisions may be handled otherwise in the contract: e.g., the flooring allowance may state that installation costs are part of the allowance. The contractor may be required to produce records of the original takeoff or estimate of the section 2 costs for each allowance item.

Other issues that should be considered in the contract's allowance provision are:
* may the client insist that the contractor use whomever the client wishes to do the allowance work?;
* may the contractor charge the client back for any costs arising from a delay by the client (or client's agent) in selecting the material or equipment of the allowance in question?


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