Should parents give their children an allowance or does it create a transactional mindset? Picture this: An 8-year-old stands in the kitchen, arms crossed, refusing to take out the trash unless she gets paid so she can buy the newest toy all her friends have. Meanwhile, the neighbor’s son is splitting his allowance into save/spend/give jars and taking out the trash because “that’s a family job.”
This stark contrast illustrates why getting the approach right is important. An allowance is a powerful tool. If used properly, it can help create a healthy attitude towards money and earning from an early age. In this guide, we’ll show you the pros and cons of allowance and how to design a system that builds good money habits.
Pros of Giving Your Child an Allowance
An allowance can be a foundational tool for teaching financial literacy and giving kids practical experience with managing money. A well-designed allowance system turns abstract ideas, like saving and planning, into real-world experience kids can use. When framed right, kids build good habits without having an expectation of reward for basic family contributions. You can make this happen with a few guidelines:
- Keep routine household chores unpaid to instill responsibility and life skills not related to money.
- Tie payments to extra, non-routine tasks.
- Set clear ground rules for saving and spending limits.
- Allow your child to decide how to spend their money within reason.
- Be consistent with rules and timing of payments.
- Model good financial behavior yourself.
- Have regular discussions about money with your child.
With these guardrails in place, you give your child a framework for learning core life skills. Giving your child an allowance along with guided financial lessons teaches:
- Money Sense: Gives hands-on experience with cash and digital money so they learn what dollars actually buy.
- Basic Budgeting: Shows how to allocate limited funds with simple budgeting systems.
- Saving and Goal Setting: Turns wants into savings goals they can work towards and track.
- Delayed Gratification: Builds good decision-making habits by practicing how to resist impulse buys for larger future rewards.
- Negotiation Skills: Encourages critical thinking by having them make a case for “getting a raise” or making a large purchase.
- Opportunity Cost and Trade-offs: Makes the concept of trade-offs tangible, showing that choosing A over B can have time or money consequences.
- Financial Confidence and Independence: Creates capable and financially mature children who can make independent decisions and deal with the outcomes.
The benefits of allowance go beyond money management and help you raise competent young adults who understand limited resources, the consequences of choices, and how smart planning pays off.
Cons of Giving Your Child an Allowance
Should kids get an allowance if the drawbacks seem overwhelming? Without the right guidance and guardrails, allowance could backfire. The good news is there are fixes for the most common problems and we’ll go over both. Here are some challenges parents run into and how to avoid them:
- Poor Spending Habits: Impulsive spending leads to instant gratification winning out over smart management.
- Fix: Require saving first (for instance., 20% of their allowance) and use a 24-hour “wait before you buy” rule for larger purchases.
- Chore Negotiation: Basic household contributions turn into a transactional debate.
- Fix: Keep basic chores unpaid with the understanding that everyone in the family does their fair share. Allowance is for extra responsibilities.
- Sibling Conflict: Younger children may not understand why older siblings are getting more money.
- Fix: Explain that older kids get more because they have greater responsibilities and expenses.
- Reduced Motivation: Money can harm the satisfaction of contributing to the family.
- Fix: Praise your child's efforts and encourage pride in a job well done.
- Financial Strain: Providing a steady allowance can be difficult for families on a tight budget.
- Fix: Use non-cash rewards or privileges for extra responsibilities. Teach money skills by involving your children in real decisions like comparing prices at the grocery store or explaining how you budget to pay bills.
The goal of an allowance should be teaching financial literacy and letting your child become more independent. With a clear plan, you can turn a simple allowance into an experience that prepares your child for financial adulthood.
When to Start Giving Your Child an Allowance?
You can start giving kids allowance once they understand the basic concepts of counting and money, which begins as early as 4. However, you should take more than age into account before creating an allowance system for them. Ask yourself a few key questions, such as:
- Is my child mature enough to save and follow simple rules?
- Am I prepared to be financially transparent with my child when teaching by example?
- Can I comfortably afford a consistent weekly amount?
- Can I enforce the rules we set up, like having them save a certain percentage of their allowance?
- Do I have time for weekly money check-ins?
If you answered “yes” to most of these questions, your family is likely ready to start your child on an allowance.
How Much Allowance Should a Child Get?
First, determine how much you are willing and able to give your child on a consistent basis. This should give you a baseline budget. From there you can establish rules or conditions your child must meet. You must communicate these expectations clearly and upfront. Here are some popular methods to determine the amount:
- Age-Based: Multiply their age by a set amount of money, such as $.50 or $1, to determine their weekly allowance.
- Fixed Flat Rate: Pick a sustainable weekly amount based on your family budget, regardless of your child’s age.
- Chore-Based: Give allowance for chores you've determined are age-appropriate and beyond basic family responsibilities.
- Hybrid Approach: Combine a small base allowance with opportunities to earn extra through exceptional behavior or other tasks.
Consistency, clear rules, and follow-through matter more than the exact dollar amount. Start with what feels manageable for your family and weave in money lessons along the way.
How Should I Give My Child an Allowance?
From a piggy bank to a real bank (or credit union), there are many ways to teach kids allowance management. For younger children, a physical jar or bank makes concepts like saving and spending feel real because they can see their money grow and diminish.
As your children get older and better with saving, consider introducing them to more complex financial tools by helping them open a bank account. Golden 1 offers a Youth Savings Account that will give your child a safe way to manage their money with your guidance. The move from physical money to credit union tools will help your child build confidence with managing their money in “grown up” financial systems.
Allowance FAQs
What is the average child allowance in the US?
Typical allowances for children in the US varies by location, the child's age, and family income. However, according to a survey by T. Rowe Price, the national weekly average is $19.39.
Do most kids get an allowance?
According to a T. Rowe Price survey, 79% of parents in America give their child an allowance. Before giving your child an allowance, make sure it fits your budget and is something your child is mature enough to handle.
What is a good allowance for a child?
A widely cited rule of thumb from parenting and finance resources is to use the budget-friendly age-based method. Multiply your child's age by $.50 to $1 to get the weekly amount. For example, if your child is 13, they would get between $6.50 and $13 per week. Of course, this can be more or less based on your preferences and budget.
