Allowances: How Much, How Soon, What For?

Should you give your child an allowance? And if so, how? Let’s take a look.

Giving your child an allowance is different from just giving your child spending money on an as-needed basis. An allowance teaches your child how to save up for something and how to decide what to buy. Unlike coming to mom or dad for money, as if there were an unlimited, hidden supply, having to work within the parameters of a weekly allowance is closer to real-world money management.

You might be tempted to dole out money on demand instead if you want to control what your child buys. Your child has to make her case for getting the money from you and you get to reject her plan or change it. This is understandable. Kids do spend money frivolously sometimes. But when you control the purse strings, your child learns nothing about money. She learns instead a lot about making a convincing argument. She learns to manipulate you. That’s not really what you want.

So an allowance is a good idea. What should an allowance cover?

Not things that are necessary for health and safety. Don’t make your child’s allowance apply to his school lunch or bus fare to school or his purchase of food for the family pet. You don’t want your child to be tempted to divert money from health and safety needs to less important stuff. An allowance should be for toys, books, games, things the child wants in between birthdays and holidays.

The amount of a weekly allowance should be enough to cover reasonable desires if the child saves for maybe a month. So the amount depends on the age of the child: the older the child the bigger the allowance – and the more the allowance is expected to cover clothing, entertainment, and saving. But an allowance should never be more than parents can afford or an amount determined by what other kids (supposedly) get.  Your children shouldn’t be living better than you are!

When should you start an allowance for your child? Start an allowance when your child is old enough to have “wants” and is old enough to be able to count and have glimmers of understanding about money.  For most kids, this is about age five.

An allowance should not be tied to chores. Chores are done as a contribution to the well-being of the family. A child is not free to avoid chores because he doesn’t need the money that chores have been linked to and a child is not free to negotiate the rate of payment for chores. Chores, like housework and yard work, need to be done.

An allowance is granted as a benefit of being part of the family. It comes with no strings attached and can’t be withheld for bad behavior or for not doing chores. Remember the purpose of giving an allowance is to teach children money management and decision-making. The purpose is not to have a way of buying your child’s cooperation by setting a price on it.

So your role as the giver of allowances is to be scrupulously regular about payment. Set a day of the week and an amount and make sure you deliver on time. Doing so helps your child plan his money use and increases trust. Also, don’t borrow from your child. He may save it up to a nice amount that can seem tempting when you’re short of gas money. But if you’re trying to teach your child money management, you do that by example. Borrowing is not the example you want to set.

Finally, don’t manage your child’s spending for her. She will spend her money on stuff you think is silly. That’s her privilege. She’s a kid, with silly kid interests, and you’re an adult. Let her learn on her own if a purchase is worthy.

After all, learning how money works is the point of having an allowance.

© 2012, Patricia Nan Anderson. All rights reserved.