Do you give your kids an allowance? If not, you’re in good company because the majority of parents don’t. A poll from CreditCards.com found that 40% of kids under the age of 18 receive an allowance.
There’s a lot of conflicting advice out there regarding giving kids an allowance. Some people say an allowance is necessary to teach kids how to manage their money. Others claim it could lead to feelings of entitlement and that you should tie the allowance to chores.
Personally, I think you can give your kids an allowance, but it doesn’t have to be much. I started by giving my son spare change at a young age so he could begin developing a basic concept of money.
It’s crucial to teach kids money concepts, but you also don’t have to bust your budget to ensure they get an allowance. If you’re on the fence about giving your kids an allowance, this blog post will provide you with some ideas to consider.
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What Are the Pros and Cons of an Allowance?
Giving kids an allowance can help build their foundational skills around managing money. Here are some of the biggest benefits of giving kids an allowance:
- Teaches kids the value of money: Giving your kids an allowance can help teach them the value of money at an early age. This is a skill very few children learn in school, and it will benefit them their entire lives. Whether or not you tie it to chores, it’s good for kids to learn how to receive and manage their money.
- Allows them to pay for non-essentials: Once kids have access to their own money, they can start to pay for some of the non-essential items they want, like toys and video games. They can also begin saving for more expensive items they want.
- Helps them understand about work and money: If you give your kids an allowance based on the chores they complete, this can help them start to understand the relationship between work and money.
- Provides a safe opportunity to make mistakes: We all make financial mistakes when we’re learning how to manage money. It’s better for kids to make these mistakes early in life when the risks are low. Once you’re an adult, financial mistakes come with very real consequences, like debt and poor credit.
While there are a lot of advantages to giving kids an allowance, there are some downsides to consider too:
- Can undermine voluntary family contributions: Some people argue that tying an allowance to chores could undermine voluntary contributions. Some chores should be completed simply because you’re a part of the family, not for earning a financial reward.
- Could be a financial strain: For some parents, giving multiple kids an allowance of $10 per week could be a strain on their budget.
- Requires a lot of parental supervision: I think one of the biggest mistakes many parents make is giving an allowance but not providing guidance on how to use it. The CreditCards.com poll found that one in four respondents received no financial guidance growing up. Children do not naturally understand how to save and spend their money — you have to provide them with structure and teach them these skills.
Tips on Getting Started
If you want to start giving your kids an allowance, here are some tips for getting started:
- Start at a young age: Many parents don’t start giving their kids an allowance until age eight or older. But research shows that kids can grasp the concept of money by age five. I think it’s a good idea to make money a part of their life at a young age. The earlier they begin learning about saving and spending, the more likely these skills will stay with them as they grow up.
- Provide a lot of guidance: Just giving your child money to spend isn’t enough by itself. You need to provide a lot of guidance if you want your kids to learn good financial skills. You can give your kids the independence to make their own choices, but talk to them about those choices.
- Start small: An allowance isn’t really about the amount of money you’re providing — it’s about the financial lessons the money is teaching. If you’re on a tight budget, don’t feel like you need to give your kids a big allowance. Even $1 is enough to start teaching money management skills.
- Teach kids to budget: An allowance is a great tool to teach the concepts of budgeting and saving. Once they have a monthly allowance, they can begin to understand how to budget for the things they want.
- Help them see their money growing: An allowance is also a great opportunity for kids to set goals and save for the larger purchases they want. Giving kids a piggy bank where they can store their savings is great because they’ll be able to watch that money grow week after week.
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The Bottom Line
When you give children an allowance, it’s really just a tool to teach them good money management skills. Don’t be afraid to start small and allow them some independence while still providing a lot of guidance along the way.
Do you give your kids an allowance? If so, how and at what age did you get started? Let me know in the comments!