Are your children old enough to ask for (or demand) an allowance?
Many parents struggle with the concept of giving a weekly salary to their kids. After all, you are the one paying their rent, utilities, and grocery bills. Why would you have to pay them to live with you on top of that?
And who or what is introducing them to the idea of an allowance in the first place?
These questions will likely never find their answers. That's why we have created this handy guide on when and how you should give your kids an allowance!
Teaching Your Kids the Importance of Money
When your child is old enough to spend money, they need to learn what makes it so valuable. If they have yet to hold their own job, they likely have little understanding of what it took to earn each dollar they spend.
By giving them a specific amount once a weekly, bi-weekly, or monthly, you can structure their financial education. If your children are introduced to the real world without a proper knowledge of how money really works, they could make any number of mistakes. When you ask whether or not you should give your kids an allowance, this should be number one on your reasons why you should.
Pros and Cons of an Allowance
There is no right or wrong answer to whether you should give your child an allowance. Much of it depends on your family dynamics and preferences. You will find pros and cons to both approaches. A few pros include:
- Learning how to look after money
- Making decisions and also mistakes about money, which allows kids to learn
- Seeing the relationship between hard work and rewards
But do children deserve an allowance? There are also drawbacks to this system, such as:
- Cutting into your own budget
- Another thing for you to keep track of and monitor
- Fighting over whether kids fulfilled all their duties to earn an allowance
Let's look at these pros and cons more in-depth.
Benefits of an Allowance
Many kids can learn the value of a savings account (piggy bank-style) from an allowance. Such a saving habit can often carry over throughout their lives, teaching them proper financial planning skills and budgeting.
Beyond that, spending small amounts of money teaches basic math and economics skills, as well as social interactions. Your kids will recognize that the money they have (whether that is $5 or $50) only goes so far. And when they have to make careful decisions in their purchasing, they will better recognize why you have to do the same with the larger purchases in life.
When Not to Give an Allowance
Should you refuse to give your kids an allowance sometimes? Yes — under certain circumstances. These might include:
- When you are already struggling to make ends meet each month.
- When you see that they are spending their allowance money frivolously.
- When you are worried that it creates an unhealthy association with money as their only motivation for doing things.
- When you are worried they are becoming spoiled.
Most of these points can be addressed by simply reducing the amount of money you choose to give them. You can explain that times are tough, or that they need to work harder to actually earn the allowance they receive. As a result, they may perform more tasks around the house or improve their grades at school.
At What Age Should You Give Your Kids an Allowance?
After parents have decided to give an allowance, the next question is: At what age should a child get an allowance? Again, there's no hard and fast answer. It depends on your child's maturity and your feelings on whether kids should get paid to do chores. Some families believe kids should do chores because it is their duty, not because they should get paid for it.
Many parents begin giving an allowance when a child starts school at age 5 or 6. They will be taught about money at school, and giving them an allowance reinforces concepts such as learning the value of coins and adding or subtracting. Children are also old enough to grasp the concept of doing work in return for something. They understand you must pay for things at the store. You can help them learn by letting them pay for things with their newfound income.
As children get older, they'll have a better understanding of money. Some families wait until kids are 10 or 11 to give an allowance so that they will be more conscientious with their income.
How Much Allowance Should You Give Your Kids?
The answer depends on your children's ages, your financial circumstances and even where you live. For a young child, $2 or $3 per week is enough. For a teenager whose duties around the house may include babysitting and cooking dinner, you may feel that $20 per week is fair.
Families also sometimes give their children a higher allowance but expect them to pay for all of their own purchases. For instance, if the family goes to an amusement park, Mom and Dad won't pay for any arcade games or buy souvenirs. It's up to the kids to plan ahead.
Methods for Giving Your Child an Allowance
For many kids, allowance is given for performing jobs around the house. You can determine age-appropriate chores and give the cash allowance after they've been completed each week.
Other families may use a credit method where kids earn credits they can trade in for toys or extra electronics time. Discuss it within your family and figure out what works best for everyone.
So, should kids get an allowance? Ultimately, granting an allowance for your children is not for every parent. But if you choose to do so, you can figure out a few great ways to incentivize them to act better overall, teach them the value of hard work, and instill long-lasting money management skills.
Want more tips and tricks every week? We love discussing a wide range of personal finance topics that both inform and entertain. Keep your eye on the Atlas Credit blog!