An allowance is money earned or given to a child at regular intervals to
teach the child how to manage money.
Parents differ in their opinions about giving allowances to their
children. Some parents believe that they should provide for the material
needs of their children, and there is no reason a child should have to
manage money until they are old enough to understand the working world and
mature enough to make responsible purchases. Other parents feel that
giving their children allowances is a good way to teach them about money
and financial responsibility. If parents decide to give their children
allowances, there are several ways to do it. How much they receive, how
often they receive it, what they may spend it on, and whether the children
must earn their allowance by completing chores at home are all questions
for parents to consider.
School-age children are starting to develop the cognitive skills necessary
to understand basic monetary ideas, such as identifying coins, counting
change, and matching small amounts of money to items they want to buy.
Apart from introducing children to basic economics, money lessons have
other benefits. Money illustrates parental values and teaches children
about the relative worth of things, time, and effort.
Children younger than five are not mature enough to understand money
management. They usually resist saving money and tend to spend money right
way. Older children are more likely to take responsibility for their
money. As they learn math skills, children are more able to calculate
expenses. They can begin to figure how much they need to save for a item
or how much they will have left over after buying something.
By the time children are five or six years old, they may be responsible
enough to handle small amounts of money. Before starting an allowance,
parents may discuss budgets with children and what children want to buy.
They may shop with their children in stores on online and discuss prices.
The amount of allowance is a personal choice for parents. Young children
may be given one or two dollars, while teenagers may be given ten dollars
or more. Some families will give close-in-age siblings the same amount of
allowance, but general practice is to give older children more money than
Young children may be given enough money to buy small items such as
trading cards, hair clips, or ice-cream bars. The next time parents go
shopping, the children can bring their own money if they think they might
want to buy something. If they have already spent their allowance, then
they have to wait for the next allowance before buying something else.
Parents may want to reinforce lessons the children learn in school by
making a chart that shows basic money equivalents. They may choose to post
it on the refrigerator or in the child's room. Playing store and
putting price tags on things around the house teach children relative
worth of items.
Like adults, children may have trouble saving money. If a child wants to
buy an item that costs more than his or her allowance, parents may choose
to be flexible. They can allot the child an extra allowance or help the
child figure out how long it would take to save the amount from future
allowances. Parents may offer to provide matching funds, contributing a
dollar for every dollar the child saves.
Some parents devise a category system to help their children manage their
allowances. The first category is short-term expenses, money the child may
spend right away on whatever he or she wants. The second category is
savings, money put in a special jar, where its gradual accumulation is
visible. This money is used for items the child wants that cost more than
the weekly allowance. The third category is charity, money for church
donation or a local cause, for example, or for gifts. The parents may
decide how a younger child's allowance should be divided among the
three categories, or the budgeting may be left up to an older child.
Many people believe that child's allowance should not be tied to
household chores. Children should help out around the house because they
are part of the
, not because they are paid. Allotting children chores that are proper to
their abilities teaches responsibility and makes them feel the worth of
their contribution to the family. The sense of belonging and empowerment
gained by being an inherent part of a family team is important for
children. Children learn to contribute something valuable and realize
that others depend on them to do their part. This relationship raises
and allows children to see themselves as active and valuable participants
in others' lives.
If parents expect children to pay for their needs, such as school clothes,
gear, music lessons, or a comic book collection, or services the parents
would otherwise pay for, the allowance has to be large. These items should
be in the budget developed with the children's help.
Children need to learn that they can increase the money they have by
saving it or working for it. Parents may create a list of jobs children
can do above and beyond their regular chores, listing the amount of money
the parents are willing to pay for these jobs.
Some parents stop giving allowances to their teenagers at a certain age
and encourage them to get a part-time job. Although teenagers may earn
money from jobs outside the home, they may still need parental guidance to
develop correct spending habits. They need to know how to save money and
give to charity as well.
Parents can be authoritative without being dictatorial in teaching their
children how to manage money. They can invite suggestions from the
teenager about what he or she should buy and how much money to spend on
it. Teenagers may be asked to buy gas for the family car when they drive
it to work or to social events. They may be asked to use their earnings to
pay their telephone service if they own a cell phone and to buy gifts with
their own money for their friends and for the family.
Some families put teenagers in charge of all their own expenses, so they
learn to budget. But some parents also maintain that teenagers should not
take large sums of money from their account to make important purchases
such as a car or motorcycle without parental permission. Money can become
a difficult issue between parents and children of any age, and learning to
be flexible can help each member of the family become more financially
—A summary of income (allowance) and expenses (spending) for a
given period of time.
—Giving money or providing help to the poor and needy. To make a
donation of money to a religious organization.
—A small or minor job; a routine duty of a household or farm.
The Allowance Workbook: For Kids and Their Parents.
Franklin, TN: Kids' Money Press, 2000.
Kids' Allowances: How Much, How Often, and How Come.
Franklin, TN: Kids' Money Press, 2000.
The 9 Steps to Financial Freedom.
New York: Three River Press, 2000.