Kids and Allowance Money

The best time to start giving your children money is when they will no longer eat it. Basically, when they don’t put it in their mouths, they can start putting it in their bank.
-Barbara Coloroso, parent educator and author

Having an allowance teaches your children both the power of money and the pitfalls of managing it. But negotiating the allowance process can be complicated, and there are different views about when, how, and how much.


When you first give your children an allowance, offer some guidance in its care and spending. Teaching your children to pace their spending is a vital beginning, well illustrated if they run out of money before the next allowance day because they’ve spent it all on junk food or candy. It’s up to you, then, to resist any requests for extras, since this experience is all part of the learning process.

When to Start

Some experts advise beginning an allowance on a child’s 5th birthday; but that could vary, depending on your child. Yearly discussions, perhaps around birthdays, allow for the possibility of an increase. Also, the experience of negotiation as needs change with age will give your child a sense of importance and control. Some people feel that children should learn right away—as soon as they begin receiving an allowance—that a percentage should be saved and a percentage should be given to charity. You, as the parent, may feel that that is a lesson better learned later, especially if your child is receiving a small amount of money. If you really want the allowance process to be one of learning, you could give your child extra allowance money, and then have them donate 10% to charity and put 10% away for savings, and still receive the amount per week that you think is fair.

Allowance Money: How Much?

One possibility is to give the amount of the child’s age in dollars each week. However, you need to judge this based on your own budget and values. Do not base the amount of your child’s allowance on what children in the neighborhood receive. Keeping up with the Joneses is the last thing you want to encourage.

“Free” Money, or Pay for Chores?

Some experts feel it’s not a good idea to “pay” a child allowance money for doing household chores. Obviously you don’t get paid for making dinner, so your children shouldn’t expect money for developing good habits by doing their share around the house. Another opinion comes from renowned parenting experts, Richard and Linda Eyre, who feel that A family needs income to live and a family needs to exert effort in the course of daily life to survive and thrive. Parents are usually the only ones that earn income externally. However, if kids wish to share in the family income (e.g., allowance), then it's reasonable that they share in the family effort.”

This is a decision you as a parent will ultimately have to make. You know your child, and only you can know the best way for her/him to learn good lessons.

Extras

Whether you pay an allowance for normal, daily chores, or separate the allowance process from them, you may offer to pay for the completion of specific chores (particularly those you might pay someone else to do anyway). In that case, set an exact price for each task and give them the choice—e.g., weeding, raking, washing windows, waxing the car, or shoveling snow. Successful completion will give value to their efforts while it illustrates how to generate income from goal-oriented work.
Allowance should be given every week and not taken away as punishment. Punishment should be a lesson in good behavior, not a cash transaction.

Ways to Encourage Saving and Sharing
  • Encourage your children to wait with anticipation until they can afford a coveted game, CD, clothing, or jewelry. Give them a bottle, piggy bank, or savings account to watch their money grow. Do not give cash advances on allowances unless it is absolutely necessary. If your child finds a toy or book that is unavailable anywhere else, and they don’t have enough money for it, you might stretch your rules. Again, you know your child! Do what you think is best.
  • If kids are old enough, explain credit cards and monthly payments and the dreaded interest process. If you teach your child to only buy what they can pay for NOW, you will have taught them a valuable lesson.
  • Propose saving for a gift for a special person and encourage them to experience the pleasure that comes with generosity.
  • Suggest starting their own college fund or adding to yours.
  • Show them how to calculate saving $5.00 a week for ten years at the current rate of interest, and see how quickly that becomes an “enormous” sum!
  • For your older children, give them a monthly rather than a weekly allowance to expand their experience with budgeting and shopping for the best price.
  • Promote the idea of charity by making your children aware of collection boxes in places of worship, supermarkets, theaters, and at every McDonald’s. Perhaps donate 10% of every allowance to a charity.  
A Delicate Balance

If your child wants to buy something that you think isn’t worthwhile, what do you do? Be as clear as possible. You might say, without emotion, “If you buy that, you’ll only have $3 left for our trip to the book store tomorrow. You don’t get your allowance again until Saturday. Why don’t you think a minute before you buy that?” And stick to your rules. If you end up giving your child more money, he/she hasn’t learned anything other than “if I try I can get more money out of my parents!”

Who Pays for What

“Need” versus “want” is a good strategy for determining who pays for what. The “needs” include such things as school clothes and supplies, lunch money, and school trips. The “wants” are everything else. If your teenager loves to go to the movies, perhaps you can pay for the first movie of the month. You can split the cost if your child wants to see a movie the next week, and all other trips to the theater are paid in full by the teenager. You may be surprised how quickly your kid will elect to rent a DVD for $2.00 versus spending $11.00 on the latest release!

Children very quickly develop an accurate sense of value-for-money once they have freedom over a reasonable amount of their own. Start early and with your gentle guidance, an allowance will teach your children an appreciation for the disciplines, rewards, and fascinations of skillful money management. Set the allowance amount, agree on the rules, and stick to them. Your children will thank you for it one day!

© Harris, Rothenberg International, LLC