Allowance Basics

image of child holding money

Whether or not to give your children an allowance can be a difficult decision. Some believe that kids should do their part in the household, regardless of whether or not they will get paid. But, others believe that giving children an allowance teaches kids about the value of money. Here's some information that we hope will help you choose.

Giving an Allowance...Should You or Shouldn't You?

There is an ongoing debate between parents and professionals about the positive and negative effects of giving children an allowance. The debates range from the right age, whether chores should be rewarded with allowance, whether they should be able to freely spend or be closely monitored, and how much money should be given. Of course, there are also those that are against giving an allowance altogether and find that it could potentially harm the child's ability to manage money in their adult life. Both and offer great insight into these topics. We looked closely at the arguments presented on their sites and wanted to offer you both sides of the story so that you can make your own informed decisions on how to govern your household when it comes to money management.

What is the right age to give an allowance

There is no "right" age to give your child an allowance. The right age is truly when you feel that your child is responsible enough to understand what money is, what it's for, and why you've chosen to give it to them. When children understand that money buys things they want and Mom and Dad don't just "go get it", they will most likely be able to understand the concept of having their own money. This is good practice for them to learn about saving, spending, and what things are worth. For example, if they want to buy a video game, and they only have 10 dollars, they will learn the importance of saving for something that they really want. While learning, they will no doubt have some missteps while learning that buying everything they want, when they want it, will lead to them having no money left. This learning period is what worries some about the idea of giving allowance at all - financial irresponsibility.

Is my child's financial future at risk if I give them an allowance?

When first learning how to manage money and navigate the world of merchandise, it-s natural to get a little excited and buy things that you want simply because you can. So, of course, kids are going to want to buy their favorite toy, candy, clothes, etc., when given money for the first time. Does this mean that they are going to spend recklessly in adult life as well? Kristan Leatherman, coauthor of "Millionaire Babies or Bankrupt Brats? Love and Logic Solutions to Teaching Kids about Money", and quoted in an article we read on, says that kids are going to learn from their monetary mistakes and eventually correct their behavior later in life.

Some parents disagree. The argument against allowance says that kids, who are given money at a young age, will learn poor money management skills and carry them into their adult lives. This may be true, if the childlike spending habits are not corrected. For example, a child spends their money however they wish, and when they run out of money, their parents give them more without question. The argument against allowance becomes clearer when the parents' ability to teach wrong from right is taken into account.

In terms of credit, when a child runs out of money and wishes to buy something, Leatherman also tells the readers of to let them practice with owing money as well. By understanding that they can purchase things with "borrowed" money, they will soon learn the importance of paying it back. The upside to this type of practice - saving and buying on (their parents') credit - could save children from the financial downfall that learning this lesson in their adult life could cause.

Should chores be required to earn an allowance or given unconditionally?

This allowance debate seems to touch on every aspect of the idea - even between parents that agree on giving an allowance. Those that agree with tying chores to an allowance believe that the child will benefit from the experience of working for their money. The parents who disagree with connecting the two, however, feel that they miss out on the experience of being part of a family unit.

Tying an allowance to how many chores a child does around the house does have the ability to teach them the value of hard work. It's a valid argument, especially in the economy we have today, that hard work can never be taught too early. It's also good for children to learn that they are not privy to having money so that they do not become entitled. One suggestion from a babycenter member we found on the site says that children should only be paid for chores that are outside of the norm for them. For example, making the bed or cleaning their room should be a daily responsibility but emptying the dishwasher or vacuuming could be seen as "above and beyond" and can earn the child money.

The other side of this argument explains that they will miss out on the meaning of being part of a family. Being paid to help out could potentially cause the child to refuse to help out around the house, or in society, unless he/she were to get paid for it. The key in paying children to do chores is to make sure they understand that they are part of a family and would be expected to help regardless of the allowance being given. The allowance should be introduced as a reward for a job well done that can be taken away as quickly as it was introduced.

How much is enough?

Just in case you're still considering giving your kids an allowance, or at least trying it out, let's talk about how much you should give them and how often. There are many different methods that have been discussed among parents on the message boards of and we'll outline our favorites below.

How often?

  • Once a week (unconditionally) - Child is given a base pay allowance every week regardless of which chores they do. This is the method typically chosen by the parents against linking chores with allowance. Some parents withhold allowance for that week if the child misbehaves excessively.
  • Weekly (with conditions) - Parents who choose to link allowance to chores typically give it to their children weekly, provided they have successfully completed all of their chores that week.
  • Per chore - Each chore is assigned a monetary value and the child receives that amount after the chore has been completed.
  • Daily (with conditions) - A small amount of money is given to a child at the end of the day if their extra chores were done for that day.

How much?

  • $0.25 (or other value less than a dollar) per chore - This is mostly used with young children with a vague understanding of the money system. A small amount is given each time they help a parent with a chore around the house. Amount and type of chore are increased with age. Typically a maximum earning potential per week.
  • A dollar per year of age - This is an easy way for some to determine the amount of money to give a child. (For example, a 6 year old child could receive 6 dollars per week.)
  • Enough to cover expenses - If you continue giving your child an allowance into their teen years (which is recommended to further develop money management skills), you should give enough to cover weekly or monthly expenses. These expenses are what your teen reasonably wishes to spend money on and what you expect them to pay for on their own. Depending on whether or not your child has a job, you may want to adjust their allowance so that it only supplements their income from work.

Note: Regardless of what you think you should give your child, or what they would like to receive, make sure you factor the allowance you're considering into your budget first to see if you can manage to keep up with it. If you can't see it lasting very long without having to cut it out, reduce the allowance. Click here to learn more about creating a budget.