How Much Allowance Should I Give My Kids?
Guess my husband and I have been paying our kids sweatshop wages. It’s not intentional, but with three kids, weekly allowance is a noticeable expense. And right now, my husband and I do pay for all their needs. So how much money do kids really need in their wallets?
More than we are paying out. There are definite clues the amount of money we provide is not enough. For example, their birthday “windfall” is so scorching hot it doesn’t have a chance to burn holes in their pockets; they spend it that fast. And my son wants an Amazon Dot; at the current rate it will take him an eternity, not just a kid eternity but a real eternity, to save enough allowance for it.
So where do we go from here?
Google.
There’s a ton of info out there on kids and allowance and every article I read agreed on one simple point: teaching money management to our kids is a necessity (even though the Amazon Dot or the doll tent is not, but more on that later…). All gave advice on how to structure allowance. And should allowance be linked to chores? Hmmm, depends on who you ask. But when it comes to the question of How much allowance? the sources I looked at gave the same answer. Give kids:
50 cents to one dollar per year of age.
I appreciated the clarity of this advice, but…really? Do my 11-year-olds need $11 a week in allowance? Or even $5.50? Ok, I’ll admit my miserly tendencies, the ones which began years ago when I flatly refused to break and spend a cherished 20 dollar bill. I wasn’t a spender. Wow, I got a crazy amount of grief for that then and still do. I like twenties just as they are. However, I realize something else: my kids’ wallets are like sieves but in order for my kids to learn about financial responsibility, they need money.
So Mom’s gonna cough it up.
It’s a monumental task, teaching fiscal matters to our kids, but before we give allowance parents need a good place to begin:
At what age do I start giving an allowance? One source suggested judging a child’s ability to handle money before opening our wallets. The article wasn’t clear. Did this mean we shouldn’t give money to the spend-happy child and only to the thrifty? It seems the child who spends as fast as she can (like my kids) needs that allowance in order to learn to handle it. But maybe that’s what the article was saying. Another source was more clear: start with the first tooth fairy visit, if this is something your family does. This may seem young, but what better time to start talking money than when kids are at their most impressionable and receiving something shiny under their pillows.
So how do I decide whether to give my child 50 cents or a dollar per year of age? That’s a big range in “salary,” for sure. Webmd.com suggested an idea I just love, love, love…so much so it became a writing assignment for homeschool and my kids were stoked about it: have your child pen a proposal for how much allowance they should receive and why. Have them detail what they would use their “income” for. Not only can their narratives be cute-as-heck, but they are a great way to help decide how much to give. And help you assess whether purchases on the wish list are ok or not (Amazon Dot, four-poster bed for stuffed rabbit…security camera…yes, no kidding). Don’t make it too easy or too hard to save for that coveted lego set…but it must be earned. Give a dollar amount that prompts kids to have to make choices, just like in real life.
And this is important, too (no political reference intended!): as hard as it can be, let your child make money mistakes through spending choices. In other words, no bailouts. It’s hard not to step in but your child will learn a valuable lesson and become more financially savvy in the process.
How much allowance should be put into savings and charity? Saving money teaches patience and financial planning; giving to charity teaches generosity. And allocating money for both teaches budgeting. Once you’ve decided how much allowance to give, sit down with your child and use a real world formula for figuring how much goes to savings and how much goes to charity. Sources I looked at recommended saving anywhere from 10% to 20% from each paycheck, so if weekly allowance is treated like one (wow, wouldn’t a paycheck every week be outstanding?), then kids should put 10% to 20% of their allowances aside for savings. Charity? Follow the example of the most generous income group in the U.S. which, interestingly, is the one in the lowest income bracket: have your child set aside between 4 and 5% of her allowance. Or use the example of church tithing and make that percentage 10%.
Should allowance be linked to chores? Well..maybe. If so, it’s a black-and-white way to determine how much dough your child gets per week, when each chore is assigned a dollar amount. Kid reap the reward of hard work but also experience the consequences of a pay “cut” when the trash is left overflowing. However, keeping and following a chore chart for tracking a child’s weekly salary can be complicated if you have several kiddos, and many of us do. If chore charts and dollar amounts result in a ledger book heftier than that of a Fortune 500 company, link chores to privileges. As in, “You can play Minecraft or hang with your friends after…” Then consider a “bonus” for extra jobs around the house, like helping dad wash windows (hint, hint). And dole it out right away after the work is well-done. Whichever approach you take keep a list of chores for your kids so they know the expectations and remind your kids that this work list isn’t meant as a punishment, it’s meant as their contribution to their family.
My teenager has a job. Should she still get an allowance? This can be a complicated question to answer (but most situations regarding teens usually are!). According to Kiplinger.com, teens with other income should still receive an allowance. Why? Because more income means more responsibility and this is a prime opportunity to up the financial ante. Kids this age can contribute toward car and cell phone expenses. They “go out” regularly and should pay for those activities as well. Graduation from high school is on the horizon; this is a great time to discuss your teen’s contribution to a college savings account or a traditional one. The “money” talk is especially valuable during the teen years; so continue that weekly payout. However, adjust it as you see fit depending on your child’s job income, expenses and budget. (Consider sitting down with her and helping her plan one.)
What if I can’t afford to give my child an allowance? Don’t worry. According to the webmd.com article just 60% of families provide an allowance to their children. If giving an allowance is not in your family’s values or budget, there are many other ways to teach your kids about money management. (These options are great for kids who do get allowance, too.) Playing “store” with your young ones is a great way to introduce making choices with money and staying in budget. Try board games like Monopoly or Payday and let your child be the banker. I set aside $500 in Monopoly (Miser Mom can’t break that big bill!) for a “rainy day,” or when my son has built up Park Avenue. Which is every time we play. And I’ve watched my kids follow this example. Online money games and videos are another idea. Moneycrashers.com recommends the DoughMain.com and Sesame Street websites for their resources on teaching kids about money. There’s a darn cute Elmo video called “For Me, For You, For Later” for the preschool crowd. And my 11-year-old son loves the videos (and book) featuring Warren Buffett called “Secret Millionaires’ Club.” Check out the website at smckids.com for your older children.
In the end, whether or not you decide to give your kids an allowance, tie the dollar amount to chores, or give a lot or a little, it’s important to have regular talks about money management and start doing so at a young age. A Capital One study in 2010 showed that more frequent money talk with kids gave kids more confidence in managing their money. So talk early and talk often.
My sources:
kiplinger.com
