Should I give my kids allowance?
Questions about kids and money keeping you up at night? This series answers them so you can get some sleep.
Giving a child an allowance is a longstanding American tradition, and today roughly two-thirds of parents pay out pocket money to their kids. We also believe allowance is a surefire way to teach kids lessons about money.
The bad news: An allowance on its own won’t turn your kid into a money genius.
The good news: Whether you give an allowance or not, you’re not going to turn your kid into a financial mess if you make the “wrong” choice.
You instill money smarts in your kids with all the lessons and conversations you share over the years. So the choice to give an allowance or not is up to you, based on what feels right for your family.
Parents who do decide to give their kids allowance often ask, “How much should I give?” My advice? Survey other parents you know to find out how much they give their kids, so you’ll have a frame of reference in your community. One rule of thumb is to give a dollar amount equal to your kid’s age, every week (e.g., your 10-year-old pockets $10 a week). Some parents find that too steep, especially as their kid gets older, and I hear that. In the end, you have to do what’s right for your family and your budget.
Use a spreadsheet or weekly calendar reminders to help you stay on top of your allowance system, but avoid allowance apps and online programs that require you to make your allowance transactions with your kid online or via phone. (If you find one that just helps you keep good records, that’s fine.) One of the most important aspects of giving an allowance to your kid is the conversation you have when you hand over that cash, about what it’s for and how to weigh spending and saving choices. Virtual money lessons don’t have the same impact.
The choice to give an allowance is up to you, based on what feels right for your family.
If you give your kid an allowance, follow my 5 C’s of Allowance described in detail in Make Your Kid a Money Genius (Even If You’re Not). Here’s a quick summary:
- Be clear about when and how much your kid will get, and what the money is for.
- Be consistent about when you pay allowance, and enforce the rules and spending limits you’ve outlined for your kid.
- Make your allowance payments in cash so your kid will have the experience of physically parting with that money—though you’ll have to be willing to “launder” some of it if your kid wants to make an online purchase.
- Let your kid have control over her spending choices (within reason), even if you think she’s making a financial mistake.
- Don’t link allowance to chores or punishments—you’ll put yourself in a position where you are constantly negotiating with your kid. (And don’t pay kids for grades, either—it doesn’t work.)