Ahhh the hotly contested topic of allowance. There are basically 2 camps: some parents believed strongly that it was the only way to teach children about finances. Others believed that chores should be done around the house because you were a member of the family and therefore must contribute without reward. One side thought allowance was spoiling the child; the other thought not giving an allowance would set your children up for financial failure.
I sit somewhere in the middle of both of those camps. When my kids were still in school and before they had jobs of their own, I gave each of them $600 at the beginning of each school year for clothing, school supplies and any extras they wanted for their school activities.
Then I gave them each $40/month. With that money they were responsible for buying birthday or Christmas presents and anything else they wanted {like movie tickets, frozen yogurt with friends etc.}. They were expected to help out around the house and would also help me run errands, etc., but I gave them the money less as payment for that and more to teach them how to manage their money. I tried not to police what they bought, so when they were out on their own, they’d hopefully have an idea of how budgeting works.
Regardless of what side of the issue you’re on, I thought you’d find an article I recently read interesting. It was an older article by T.Rowe Price about a study they had done. It basically said that kids who receive an allowance grow up to be more money savvy than those who don’t. But there was a catch. That is only true if the parents then go on to talk to their kids about that allowance and help them understand how to spend wisely and budget. Basically, give them the allowance and use it as a teaching tool. The parents who did that had kids that were:
More knowledgeable about managing personal finances (46% vs. 14%).
More knowledgeable about investing (33% vs. 8%).
More likely to say that their parents did a good job teaching them about money (67% vs. 32%).
More likely to understand the value of a dollar (92% vs. 84%).
More likely to discuss saving for college with their parents (62% vs. 45%).
Kids of parents who have frequent discussions and provide the highest number of learning opportunities are significantly more likely to think they are smart about money (70% vs. 15%) and kids of parents who have frequent money discussions and provide the highest number of learning opportunities are significantly more likely to have knowledge of managing personal finance (68% vs. 0%).
If you were on the fence about an allowance, do those numbers change your mind? Do you think they are onto something?
~Mavis
Jillbert says
We don’t give allowance. We pay for basics (clothes, shoes, tuition, etc) and they have to cover anything else. They never had big wants or needed money for much. My oldest worked in high school and saved like crazy and now works in college. He pays for all his books, clothes, and most meals now. My high school senior teaches violin lessons and babysits to earn extra $$ for Starbucks and whatever else she does with her friends (not much…they are all frugal). The 14 yo dog sits (big $$ in our neighborhood) but doesn’t spend anything though I suspect he hits the vending machines at school for candy. I think they follow our frugal example. We never shied away from talking about money and they know we make choices based on cost — there are things we do because it’s frugal (hang out laundry, thrift shop, cook from scratch) and they also know the pleasure of an occasional splurge (like the pricey Italian restaurant that we take them to every year around Christmas as per family tradition) and our trips abroad. So maybe it’s not so much about whether a kid gets and allowance or not but about whether a family talks about money and leads by example?
TJD says
I did not give my kids allowances. They were expected to do chores, depending on their capability appropriate with age as they grew up. They could earn money doing chores that weren’t on the regular list. Window washing, garage cleaning, weeding (1penny per weed) anything out of the ordinary. If they had activities with friends we usually split the cost in half. That said, both these kids were taught how to budget, they each had checking/savings accounts, paid their own car insurance when they learned to drive. They worked fast food, babysitting, lawn mowing for neighbors. They do pretty well as adults (32, 34) Each has paid off their college loans and are comfortable financially. They still pinch pennies, buying used cars, not new, canning, shopping sales. both are pretty handy at home repairs, but know their limits and call a professional when needed. Better than that they barter frequently. My girls have done well but I still get the occasional call asking financial advice.
TJD says
That one penny per weed? In hindsight not one of my better ideas, my oldest daughter was a weed pulling machine! one day she pulled about 6 grocery bags full! cost me about 12 bucks! She was 10 at the time.
Marie says
Ha! Also paid our kids to rake out the moss from our yard at $5.00 per blk garbage bag!
Delores says
We have never given allowances. We just always felt that they were expected to help out. However, we have paid for extra things done, but often we pay in things like candy.
However, I heard something once that just about changed my mind and is the best reason for giving allowances that I have ever heard of: so they can practice with money like they practice with other things.
Heidi says
I am in the allowance camp. 1dollar per week for each year of age. They could always earn more with extra chores above and beyond the daily expectations. When they were teens they got $20 per week. They could choose to spend it on lunch at school or they could pack lunch and spend the money as they chose. They also got clothing allowances. One year my daughter went to Abercrombie and got only 2 outfits for school with her money. She quickly learned to shop at more modest stores where she could get so much more. A Very useful lesson for a 14 year old. When they earned extra money, through chores or baby sitting or lawn mowing, they had to put half in savings. They are both very careful spenders as adults. My son has flipped two houses and was able to buy his dream 5 acre homestead at 28.
Aunt G says
We had free chores because your part of the family and chores that paid money. The money you earned you had to budget–give, save and spend.
My kids are accomplished musicians and make quite a bit doing gigs. They have to budget that money too.
So far they have each paid cash for cars, are saving to pay for half their college (we will pay the other half), and they pay for any extra clothes or activities they want to have or do.
We pay for their clothes to a point, gas to school, car insurance and cell phones.
They budget better than most adults and are proud of their net worth they have built in the last five years. Dave Ramsey’s plan works. Allowance or not you have to teach kids about money, because no one else will.
Linda Sand says
In our family everyone was expected to do chores because families do what is needed to support one another. And everyone got an allowance, even the parents, because everyone in the family shares in the benefits of being a member of that family.
Nan says
I usually gave allowances but sometimes I was a bit forgetful and guess what? No one noticed! I think my 3 kids learned more about budgeting in college when they got apartments. Their dad and I figured out approximate expenses (rent, utilities, food- no spending money; that was on them)and wrote a monthly check. If they squandered the money, they were the ones suffering. The girls found part time jobs and worked hard in the summers and only son was definitely not as frugal as they were. All are grown now and great with money.
Tracy says
My parents were pretty smart on this subject, I think. I am one of three girls, and when we were kids, we each had a short list of chores we had to do every week. We had very (did I say VERY?) modest allowances….$3 a week until 12, then $5 a week until we turned 16. After we turned 16, we were expected to get a summer job that would supply us with funds to buy any non-essentials we wanted. And the second we graduated from college, not one more penny. Some chores we did together as a family a few times a year, i.e. fall cleanup, spring cleaning, giving our giant dogs baths, etc. But my mother also had a list of “optional chores” we could do to make extra money before we turned 16 and could work legally. Sweeping out the garage was $1. Organizing a closet was another $1. Cleaning out the ‘junk drawer’ was $.50, etc. Detailing a car inside and out was a whopping $3. Weeding our very large flower gardens was another $3. (Keep in mind this was 40 years ago.) We also had a large closet under the stairs that was kept locked. If we left our school books or shoes downstairs in the living areas, as opposed to taking them up to our rooms, my mother would simply pick them up and place them in the locked closet. We had to buy them back! No nagging, no discussion. $1 per item. If we left our rooms and forgot to turn off the lights, my father would unscrew the light bulbs and under the stairs they would go. Again, no nagging, no arguments, just simple cause-and-effect rules. Taught great lessons about consequences, responsibility, and accountability.
Erin says
A little bit of both. They are expected to help around the house without compensation as part of the family, but we also give them an allowance of $20.00 per month. Not much, I know, and that may change, but it has forced them to really think about how they want to spend it and whether or not to save it. They can also earn more by doing odd jobs such as pulling weeds, mowing the lawn, etc. They know that once they get jobs, the allowance will stop. We provide them with the basics and if they want a name brand shirt or something, they have to come up with the difference.
When we go shopping, I make a point of teaching them how to look for bargains, compare prices, when to use coupons, how to pick the freshest fruit, etc. I think they get really tired of mom’s continuous “lessons”! The funny thing is how good they are at hustling. They are very good at using logic and my own lessons to turn things around on me and sometimes talk me into things I hadn’t planned on buying, lol!
Jumbe says
Mine don’t get an allowance, but if they want to buy anything (video games, toys whatever) we negotiate what they will do for the money, either clean something, learn something, or give things they own to charity. Whatever they feel like at the time. Each summer they do a summer project for a goal. They chose the project and the prize. Started out when they were in Kindergarten at .25 cents per math sheet, anytime. Unlimited allowance! Hah.
Torry says
I grew up poor. I learned to manage money because I had to earn it! I babysat, picked berries and beans and weeded Brussel sprouts (worst job of my life.) If I didn’t earn it, I didn’t spend it. And not one penny came from my parents. If you know that your peak earning time is summer, but that that money has to last for the entire school year, you work your buns off in the summer and you make each penny count.
When I joined the Army, we made less than a hundred dollars a month. I always had money at the end of the month. Always. I used to front the money for my friends to get a cheesesteak hoagie at the end of the month. The owner of the hoagie shop loved me because he had customers the week before payday, and so he always gave me a free hoagie. If any of the women didn’t give me my money on payday, they never got a loan from me again. (No one ever stiffed me. One woman took two days to get my money to me and she added an extra $5.00 to the amount to make up for it!)
I don’t think that it is just whether you were given money. Or whether your parents talked to you about budgets. I think if you see your parents totally struggle, you never want to struggle like that.
Amy on Oregon coast says
You don’t have to give an allowance to teach your kids about being wise with their finances! Give kids opportunity to work and be paid for it, but also give them chances to work for the greater good of the family or community. That way they learn to earn their way and you lay the foundation for volunteering. If kids are paid for work or given an allowance for no work you still have to teach them how to handle their money wisely, how to budget and how to save!!! But it works best if parents themselves are smart with their money!!!
Cheri says
I have four girls and one boy, who is the youngest. They all learn how to clean the house from the time they are 7 or 8–chores that would normally be done by a parent. The older ones teach the youngest, and they each have one housecleaning chore per day (most of the time). Sometimes they also have to weed or mow. They get counting chips for these chores in colors designated just for them. The chips are worth a dollar, which they redeem for cash when I can give it to them. By the time they are adults, they will know how to clean a house at least pretty well.
They also do chores for no money. They don’t get paid for cleaning their rooms or their bathrooms. They don’t get paid for helping with dishes or clutter clean-up, either. These are chores we feel we can expect from the them just for living in the house and being part of the family. The housecleaning chores are a little beyond these basics, and they help me out because I work, and it provides them with some spending money.
When they turn 16–or 15, in the case of my third daughter, who wanted to work and found a job that would take her–they have to work during the summer. This has continued into the school year just because it has worked out to do so. As they earn more and more, they have to start paying for their own necessities–haircuts, clothes, makeup, gifts for friends, etc. And save for college, too.
So far, they are smarter with their money than I ever was.
Heather says
Oh, I love your idea at the beginning of the school year! What age did you start that with your kids?
Our daughter who is 8 gets half her age each week as an allowance for chores. $4= $1 to church, $1 to savings and $2 for spending. She has always kept her room clean without prompting and helps around the house. She even negotiated picking up apples from our lawn in the backyard at a nickel a piece last year after we came back from a week’s vacation! We discuss budgets weekly as she divides up her money and we also lead by example too. She’s currently has $71 dollars saved for an American Girl doll which she has charted out on a sheet with colored in squares for each dollar. It’s taken her a while, but she’s determined!
Mavis Butterfield says
8th grade I think.