Kids and Allowances

Written by Laurie Lafortune

Most of us got an allowance when we were younger. I can remember comparing what I got with what friends received and some of them got a lot more than I did! (I have to admit that some kids got less and some didn’t get an allowance at all). Each week, my father gave us kids some cash.  If we ran out of spending money, we had to wait for the next week. It seemed pretty straightforward, but from a parent’s perspective, figuring out allowances for kids is a bit more complicated than it seems at first. Here are some things to think about…

  • Do you want to give your child an allowance? Why not just give them money when they ask for it?
  • How old should a child be when they start getting an allowance?
  • How much should they get? (What’s the going rate?)
  • How often do you pay it?
  • Does your child have to work, by doing household chores in order to receive the allowance?
  • What is the allowance intended for? Is it for low cost items of choice, like entertainment, movies, candy, or is it to cover such things as clothes, shoes, transportation?

Parenting experts agree that an allowance is a key to helping your child understand money and expenses. It’s a building block for financial literacy, which refers to the skills and knowledge that allows a person to make informed decisions about money and other financial resources.  One of the reasons for giving a set amount of allowance, rather than just providing money when asked, is to create a situation similar to the real world of receiving a paycheck on a regular basis. Whether you are wealthy or not, kids need to know that money is not in endless supply, available to them whenever they ask.

You can start giving an allowance to children as young as age 6 or 7, but it depends on the child. Have a detailed conversation about the process, (or a family meeting) explaining how it works, what happens if they run out of money, what it can be spent on, what you will continue to pay for,  and how often you will renegotiate the amount. You also will want to require your child to save a portion as part of their financial education. You may want to ask that some of it be earmarked for charity. How much allowance you pay depends on your own situation, the age of the child, and what the allowance is for-if it’s for candy and games, maybe 3-4 dollars a week are sufficient. If you expect your child to use his allowance for lunch money or bus money, of course it needs to be more. Some parents give 50 cents a week per year of age of the child. (So an 8 year old would get $4.00 a week). Remember you are trying to help your child to learn to manage money as if it is the real world, so the allowance should not be large enough to buy everything they want. Doing without, or not buying exactly what you want is part of adult life.

In my view, parents should pay for necessary things such as bus fare and lunches, and the allowance is for more discretionary items. That way, if a child runs out of money or spends foolishly, the consequences are not too terrible. Older children age 10 and up may be able to handle their own lunch money and 12 and up may be able to have an allowance that covers the cost of clothes.

Many parents find it easiest to pay the allowance on the same day once a week.  Once a month would be quite a large sum, and younger children might find it very hard to make the money last, leading to requests for more money, or disappointments.  As children mature you might want to change the weekly schedule to monthly to give them practice in budgeting.

Most parenting experts don’t recommend linking the allowance to household chores. The idea is that as a family, everyone does their part, without having to be paid. Otherwise you might have a child refusing to take out the garbage, walk the dog, or tidy his room if he still has money left over from the week before. But you can offer the opportunity to earn more money to your child, if they are willing to do a chore that you would not normally expect, or that you would pay someone else to do.  Examples might be cleaning out the garage or washing windows.

Providing an allowance to children is an excellent tool for teaching financial responsibility.