Should you give your kids an allowance?

I’ve always felt it is important to teach my kids about money.  My kids are young and to this point I have not put an allowance system in place.  At home, we have implemented reward-based systems where they get acknowledged and rewarded for good behaviors.  We’ve implemented things like a kindness calendar where they get stars every time they do kind acts.  But to this point, the rewards have not been attached to money.

My oldest son is now 7 and I think it’s time to implement an allowance. I think he’s ready.  I think my 5 year old is ready too.  Being a financial professional, I have never been afraid to talk to my kids about money.  In fact, it think it is so important to talk to my kids about money at an early age so they develop the right foundation sooner than later.

They are neat kids because they do understand money and the difference between saving, spending and sharing.  Both Robbie and Connor have shown they have a bit of the saving gene.  That being said, they are also being influenced by friends and TV and are starting to want things that other kids have.  I think it’s time to teach them about a means to earn money to buy things they want.

Suze Orman does not believe in allowances

Coincidentally, I was watching financial guru Suze Orman talk about allowances on TV.  In her opinion, most parents utilize allowances the wrong way.  She says “Most parents give their kids allowance based on age.  For example, at the age 10, the child gets $5 per week; At age 12, they get $7 per week; At age 15 they get $10 per week …”

Suze believes this entitlement based allowance program is the wrong approach because the kids are not learning anything about money.  Most kids who get an allowance think they get it ‘just because’.

Give your kids money based on the work they do

Suze thinks children should not get paid for tasks that are part of the responsibility for living in a home, which might include cleaning a bedroom or making the bed. Parents don’t get paid for making dinner or washing the dishes, and there are responsibilities that everyone must cover to keep a household running smoothly.

When it comes to allowance she thinks we need to stop calling it an allowance.  She prefers to call it ‘work pay’.  If they want money, they need to work for it.  This is how the real life works and better that they get used to it at a young age.

“Work pay” could include other things like washing the car, vacuuming and mowing the lawn.  She recommends attaching a dollar value to a chore.  For example, washing dishes for the week might be $3, mowing the lawn might be $5, etc.  She then says you can let the children pick chores they want to do.  This exercise teaches them many important things — how to talk about money, for one. It also starts to teach them negotiating skills, and it introduces the concept of work for pay.

What should I do?

There are a lot of different theories on allowances for kids, which I will continue to explore in future posts.  I must admit I like the idea of earning money for certain things because this is how it works in real life.

Parents, please share your perspectives on allowance and your experience with me and with others.  I’d love to get your thoughts!

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace.For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

17 Responses to Should you give your kids an allowance?

  1. We give our kids allowance. Each week, they are entitled to $1/year of age. But they have to do well on the weekly score sheet. We have a list of responsibilities, and each day I check off if they have been done or not. For instance, there are 4 things they have to do to prepare for bedtime without dilly-dallying. There are three things they have to do when entering the house. Many responsibilities are not on the list, because they are already doing them well. The allowance list is just to encourage them in areas we have identified as “next steps” that need improvement.

  2. I’m not a parent yet but work with many as a financial coach. The overwhelming majority have gone to a “work pay” or “commission” based system and loved it. It reinforces that good ol’ American value that we’ve seemed to lose sight of: work, get paid. don’t work, don’t get paid.

    The downside is you’ll have to be firm with the kiddos. The parents that want to be “friends” with their kids have a harder time.

    Great question and good luck!

    • Thanks for sharing your experience with parents. I like the part about being firm. The other aspect is being resilient. Sometimes I am firm until they wear me down! What was I thinking when I agreed to have 4 kids!

  3. Hi Jim! We too struggled with how to implement “allowance” with our girls (ages 3 and 6). I found a great chapter about money in the book “Kid’s are Worth it!” by Barbara Coloroso. You might want to check it out.

  4. I saw a bit of Suze Orman’s program where she talked about allowances for children. Her adamant approach to the ‘incorrectness’ of allowances made me take a step back and think about it. I am a grandmother and I’m now watching grandchildren who are teens and ‘tweeners’ and wondering how I might contribute positively to their financial literacy.

    I think we cannot ignore that personalities play a big part in how we handle money. Those who feel deprived seem to feel deprived no matter how much they have (and continue to deprive themselves as a result) and others are generous to a fault. They will give away their shirt in the middle of a storm. Whether or not you give an allowance with no strings attached will not change that. But we can help them to be aware of how they approach spending.

    I like Suze’s idea of a job list that kids can select from to earn the money for the extras that they desire. And I like the idea that a certain base level of contribution is expected from everyone in the family, just to keep things running smoothly.

    I treated my kids the same. They had a small allowance… not tied to anything. One grew up a saver, one a spender and one in between. I believe the differences are inherent in their personalities.

    What I would do differently is talk more about money, and be more open about the family finances.

    I think that adolescents ought to be given an allowance that covers their basic needs for clothing and let them do their own shopping. If they choose the expensive jacket and have nothing left for the jeans to go with it… ??

    Children definitely need assistance to learn the ropes of getting a bank account and putting a portion of everything they earn (or receive as a gift)… away. They need to learn to save for extras and to save for long term needs like education. But what sensible advice can you give them when returns on their little ‘savings’ account are less than inflation?

    I guess I’ve strayed from your subject of allowances…enough chatter.

    • Thanks so much Florence. I really appreciate the comment of how you gave your kids allowance and one turned out a spender, another a saver and the last in between. I see that with my kids too. They have such unique personalities.

      I think you hit the nail on the head when you talk about the importance of talking openly about money. We have done that in our house and I will continue to encourage open discussions about money and finance.

  5. I think the most important thing about kids and money is finding what works for your family. Like you said, there are many different methods and theories. Some families pay for grades; others do not. Some families divide the allowance payment into categories, such as Save, Spend and Share amounts. It also depends on the ages of your children.

    I have four kids, ages 8 – 17. We give them a small weekly allowance, chores that are expected and optional jobs to earn more money. Our kids have to keep track of their spending and saving, which leads to many great financial conversations with them. There are several virtual family banks to help the kids with this task(full disclosure here — I am partial to Moneytrail.net because my husband and I created it!). I think kids become much more thoughtful and careful money managers when they are dealing with their own money, as opposed to “Mom’s money.”

    Good luck in your quest to find the system that works for you. Keep us updated on your progress!

    Pam Whitlock
    http://www.moneytrail.net

    • I really appreciate your perspective in your comments. Very practical and sincere. I will definitely check out your site!

  6. No allowance. Pay for work AND pay for investing in the Bank of Daddy. I strongly encourage the latter as it teaches the kiddies the value of interest. If you ask my 5 year old what she will do/does with her money, she will tell you that she will put it in the Bank of Daddy for a few weeks, spend some of the interest accumulated, and let the money ride!

  7. We have two teenagers and have never given an allowance. Instead they buy special things they want with birthday or Christmas money and we provide a reasonable amount when needed. Most kids don’t really need much, and it is important to learn not to get everything you want. We provide “extras” like music lessons and tuition at a private Christian high school. These things matter a lot to them and they are grateful. They don’t ask for much. They also know they are expected to do chores without pay. Everyone plays a part in a family.

    We also have been quite candid about how we use money and how the world works. We have had long chats about how important it is to give money to those who need it as well as how much it costs to live. This week I will probably be spending some time talking about dividend investing with them because it has come up in conversation. A number of years ago we bought the game Cashflow offered by Robert Kiyosaki (sp?)and it has made an impact on them. It has served as a launching point for discussions about investing, spending on baubles and life expenses. (There is also a junior version for kids who cannot do the math).

    We have friends who have given their kids allowances. I have noticed that a lot of it is spent at the dollar store on junk. Once we were visiting friends and over dinner the topic of allowances came up. Their son realized that they were behind on their payments and said “you owe me…” We were shocked by the attitude, because in our family it is the other way around (in a gentle way). My husband has been dealing with the entitlement mentality with Millenials (Gen Y) at work. I don’t know if handing out allowance fosters that, but I think it can be a risk.

    Sorry for the length of the comment. It is a complicated issue.

  8. I’ve been giving my two boys allowances for the past three years. They are now 18 and 15. We live in the country, which makes it hard to have any kind of part-time job unless you have a licence. For the past two years, I gave $20/wk, this year up to $25/wk. I disklike tying chores to money because there is nothing that you can ask them to do around the house that is not either maintenance on the house or property or just regular tasks that keep the house running. They live here rent-free so the deal is this. If there is a job that needs done, do it. It can be anything. It might take 10 minutes or all day but they live here, so they contribulte when I ask and without complaint. I didn’t let them get cell phones until after allowance had started and told them they had to pay for the monthly charges. That made them research the most efficient plan rather than the fanciest phone. They also have to save $250 each per year for Xmas presents for relatives and that has to be put away by the end of August. For clothes, I tell them what an item they want that I think is reasonable will cost me to buy. If they want the designer tag on it, they have to put in the difference, up front at time of purchase. They have learned how fast money disappears and how not having a plan can come back to bite them. I’ve seen my friend’s kids be asked to do something where money is tied to chores, and instead of “OK”, I hear “How much will you pay me?”

Leave a reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Headline Name: Email: subscribed: 0 We respect your privacy Email Marketingby GetResponse