Making Sense of Allowances

Most parents choose to give their children an allowance. Two good reasons to give an allowance are:

1.  to teach children to manage their money, and

2.  to curb their constant requests for money.

Here are some things to consider before handing over those first dollars to an eager child.

When to Start:  Perhaps a good time to start is when your child realizes that money can buy the things he wants. That could be as early as 3 years old for some children. The sooner you start, the sooner the learning begins.

How Much:  The amount of the allowance will depend on how much you can afford to give, and the age of the child. Most parents don’t want their child to have significantly more or less money than other children in the neighbourhood or school. The allowance should increase as the child gets older, and it would depend on what your child is expected to buy with it.

Weekly or Monthly:  Most parents give the allowance weekly, as it is too hard for young children to manage their money over an entire month. Pick the day when the allowance is paid and try to stick to it. If your child asks for an advance, and you agree, it is a great opportunity to talk about loans (use of other people’s money), what they cost, how they are paid back, and what the penalty is for late payment. Be prepared for your children to ask for interest if you are late with payment of their allowance; it shows they are learning how debt works!

Connection to Chores/Grades:  Experts are divided on the issue of the connection of  allowances to weekly chores or good grades. Some feel that children should share the family workload just as they share in the resources and advantages of being in the family.  The logic is that if parents train their children to share and work together, it builds a giving, volunteer spirit, and if the children do their best to get good grades, the reward will be pride in their accomplishment.

Others argue that to link chores or grades to money will prepare children for the adult world of work for pay. It teaches responsibility and consequences. Some children may respond better to one method more than the other. Some parents use a combination where the allowance is independent of the chores but the children can earn more money if they do extra jobs.

The age and maturity of the child is also a factor. Small children need immediacy, and will not make the connection between putting away their toys on Monday and getting an allowance the following Saturday.

Saving and Giving:  Encourage (or insist) your children save a little each week. It will help them learn how their savings grow over time. They can save for short-term goals such as family birthday gifts, as well as long-term goals which might take a year or more.

There are opportunities to learn simple math such as how to divide allowances into parts – 1/4 for saving, 1/10 for charity, etc. Help your child calculate how many weeks of saving it will take before he has enough to buy the item he wants.

Sharing and helping makes everyone feel good. Giving a child an opportunity to see how his money is helping to make someone’s life better will make him feel wonderfully empowered. If you can, take him to the place where his money is being used, and show him the people it is helping, such as a centre where homeless people can get a meal.

Kids can learn decision making, patience and goal setting, and sometimes they learn by making mistakes with their money. If they learn the lesson with a small amount, they may not make the same mistake later in life when the stakes are higher.

Here is a link to further discussion on allowances.

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5 thoughts on “Making Sense of Allowances

  1. Thanks Maureen, this is a great blog! I remember my parents making me save up my allowance for certain toys, activities, etc. that were outside the family budget. My Dad would often tell us, “money doesn’t grow on trees you know!”. I’m grateful for these lessons so early on in life.

  2. When I was little, our allowance was tied into weekly chores. However, we would still always get the allowance even if things weren’t 100% done. I wish my parents had taught me more intentionally about saving and spending money wisely. Thanks for the tips!