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How To Give Your Child An Allowance

October 21, 2020 by Lazy Man 6 Comments

How to give your child an allowance? That’s easy, you just hand them money, right?

While the physical act of giving an allowance is easy, there’s more that you may want to think about.

Should you Give Your Child An Allowance?

how to give child allowance

That’s the obvious first question. There is no right and wrong answer here. There are many kids who never got an allowance growing up. Many of those kids grew up to be parents who now say, “Hey, I grew up okay without an allowance.” There’s nothing wrong with that.

My opinion is that managing money helps your child begin their financial education. They start to make choices of what’s important to them. They learn to plan and save for more expensive purchases.

Getting access to money is the first step in their financial journey. I think it’s easier to do it through an allowance, or payment for extra work around the house. Otherwise, they may have to wait until they get a job like a paper route, lawnmowing, or babysitting. Aside from this, they may get occasional birthday money from relatives, but those one-time gifts are unlikely to build lasting habits.

Earning a Basic Allowance

I believe it’s important for kids to understand that they earn the allowance. They have to do some chores around the house. It could be making their beds, doing laundry, cleaning dishes, whatever you feel is most appropriate for their age group. Not only does money means more to you when you earn it, but it also creates an expectation that it is tied to providing some kind of value.

I believe children should also be given the chance to earn extra money for extra work. In our house, that means cleaning up after the dog or making him breakfast. It isn’t always clear what should count as basic work and what should count as extra work. We need to think more about how to draw that line. If you have any ideas, please feel free to leave a comment. I’d really appreciate it.

How Much Allowance to Give Your Child

The general rule of thumb is that every child should get a weekly allowance equal to their age. My 6 year old would get $6 and my 8-year-old would get $8. When I first read that rule of thumb, it seemed like it was too much. We cover many of their expenses… why do they need so much money?

However, the $1 a year rule of thumb will make more sense when you read the next section. When you budget that allowance it won’t seem like so much…

Teaching Your Child to Budgeting His/Her Allowance

There are three basic things that kids can do with their money. They can give it to someone in need. They can save it for something in the future. Finally, they can spend it.

Many people get physical jars of Give, Save, and Spend so that the allowance can be divided out.

1. Give

I believe it’s important to start with the amount of money to give. As parents we don’t focus on giving. However, we have to cover basic needs like housing, transportation, and food. We also have to pay taxes. Many kids live a good life. They don’t have to pay any of those.

My kids can afford to give money. I think it’s valuable to get them thinking about others who are less fortunate.

The rule of thumb is to put one-third of the money in a giving jar.

2. Save

My favorite jar is the saving jar. I’ve always been the type to save my Halloween candy for a rainy day. The comfort of having those “savings” meant a lot to me.

Saving money is important in three ways. A child can learn that they can save money for something extra special. A child doesn’t necessarily need an emergency fund, but saving lays the early groundwork for that. Finally, savings are necessary to take the critical step towards building wealth: investing. (Note: Sometimes experts make “investing” its own fourth jar. I don’t have strong feelings either way, since we sweep some savings into investing.)

3. Spend

Spending is very important. Children can learn a lot by spending money. They may even learn more when they make “mistakes” or realize that maybe they should have spent differently.

Give, save, spend… you have noticed that the math is easy – simply divide the allowance by three. If it doesn’t divide easily, I’d put the extra dollar in the saving jar.

When Should Give Your Child An Allowance

If there’s one theme to remember with everything when it comes to allowances, it’s that there are no firm rules. My 6 and 8-year-old don’t get an allowance yet. It’s not that they don’t deserve one or that we don’t believe they should get one. We’re simply very busy with a lot of other activities between karate, Boy Scouts, archery, and homework. The days go by so fast that we never get to everything.

I hope to get them started on an allowance in the next couple of weeks. I want to have a plan of standard chores and bonus chores. I’m also looking at getting this spend, save, give jar. We might also make due with a few mason jars and some rubber bands to hold them together.

Final Allowance Thoughts

Much of this article is based on my gut and only a little quick research into the best way to give a child an allowance. Like everything in parenting, I’m learning as I go. I’m sure there are more than a few things that I haven’t thought of. If you happen to have more experience or even different gut feelings, I’d appreciate it if you drop me a line in the comments.

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Comments

  1. Big-D says

    October 22, 2020 at 4:11 pm

    One of the things my parents did when I was a kid was negotiate our allowance. We would have to come to the table, and tell them how much we wanted, how we would spend, and why. We would do this annually prior to school starting. I did this from 8 years old on. Prior to the contracts we would get a set amount of money ($0.50 a week – $0.25 for me, $0.25 for the church). I did this contracts and negotiation with my son starting when he was 9.

    As part of the contracts, we had the following categories:
    * Chores (make bed, dishes, vacuum the upstairs)
    * Behaviors (school grades, clean bedrooms)
    * Expenses (typical weekly expenses like lunch)
    * What expenses was covered by me (ie. If we do a family event, parents pay – If I go with friends, I pay)
    * Fines for negative behavior

    So for example, my allowance was $18 (Singapore dollars, think 2:1 back then) a week when I was 8. $2.50 a day for school lunch, $2.50 a week for extra milk, $3 a week for allowance. This was broken down so if there was only 3 days of school, I would only get $13. I had to do my chores, keep a 3.0 GPA, I paid for anything I wanted but my parents were responsible for me if we did a family event, and fines (like $2 if my room was messy upon random inspection, bathroom a mess, etc.)

    As I got older, I got more money (and better at negotiating). My last allowance was my Sophomore year, when I was 15-16, was $10 (US) a week. I had a job during summers, but my parents quit paying for school lunches. Since I had my own money, they were done with paying an allowance, and I was told to make my own school lunches (bread, PBJ, triscuits, diet mt. dew) were in the house, so that was what I had to use for lunch through high school (I never had school lunches, always brought). We still had contracts, but we were not paid for doing chores (they were expected). I never got gas money, if I drove the family car, it was my job to put gas back in it with my own earned money.

    I pretty much followed the same path with my son except he like school lunches. So I paid him like $15 a week for school lunches. I actually would do automatic deposits into his bank account via bank transfers so I don’t remember exactly what the allowance was, as I setup the weekly stipend and forgot about it until school was over (oppss). Hardest part was the school didn’t take debit cards, and we would have to stop by the bank once a week for him to take out cash. It helped him learn how to deal with that. When he drove (at 16.5) he had to pay for his own gas. I got a 20 year old pickup truck (s-10) and that was “his” car. I drove it now and then and gas was always an issue. I mean I drove it 5 miles to lowes and back and he wanted a buck for gas. I’d pay in dimes or something as I was paying for the truck and insurance .. lol.

    Personally I think you have the right thoughts – and are instilling the same type of values you want your kids to have. Do what works for you.

    Reply
    • Lazy Man says

      October 23, 2020 at 12:45 pm

      This is great! I hadn’t thought about the negotiating aspect. That’s such a useful skill to start early.

      Also, I love the 5 categories. I didn’t have anything like that, it’s just a jumble of chore things.

      That’s a great story about the truck. Nowadays I would look up the government reimbursement per mile which my wife uses at work.

  2. Joe says

    October 23, 2020 at 11:34 am

    I don’t know what to do about the allowance. My son doesn’t spend any money so I don’t see the point of giving him money.
    For now, I give him 50% of our scooter charging money. It’s actually too much for a 9 year old, but it’s not regular. So maybe he’ll learn to manage once he’s a bit older. For now, he just save everything.

    Reply
    • Lazy Man says

      October 23, 2020 at 12:21 pm

      Well, teaching frugality may be even better!

      My kids don’t typically spend money, either. They would buy lots of stuff if they had a shopping spree at Gamestop. They wanted a Switch a while back and we saved up for that. I think my goal for this could be to just increase the saving for now.

  3. Matt @ OMB says

    October 27, 2020 at 4:33 pm

    We don’t have an allowance per-se but we have a list of chores that our daughter helps with then she puts a sticker on the calendar. At the end of the month/week, I’ll transfer that money into her bank account. She has a joint account with me so it’s easy and she has access to some funds if she needs them with her debit card.

    Where it really works is if she wants something bigger like a video game or a DLC, she has to save up her stickers. And if she really wants something but doesn’t have enough we can get it and earn the stickers to pay it back. It’s definitely teaching her some financial lessons.

    I love the jars, especially the give and save ones, our daughter has to set aside a portion of the money in her account. Easy to “accidentally” spend it.

    Reply
  4. David says

    November 5, 2020 at 6:54 am

    I started giving my kids allowance when they turned 4 and I turn off the spigot when they turn 13 and can start to find other ways to make money. For allowance, I give them a quarter per year that they’ve been alive, per week. So my eleven year-old pulls in $8/month. That may seem very small, but I also pay 5% interest, per month for all deposits in the Bank of Dad. Just last month, my eleven year-old received over $40 dollars of interest. It doesn’t take long for my kids to see the power of savings and compounding interest.

    We don’t tie allowance to chores. Would we accept a child saying “thanks, keep the allowance; I don’t want to do the chore”? Nope. Chores are part of being in a family. There’s plenty of time to learn the value of getting paid for work after a child gets older. That incentive enters when my children turn 13 and face an end to allowance and Bank of Dad interest.

    So far, it’s working pretty well for us. Three of my six kids have graduated to the next stage, with one of them off to college this past September.

    Reply

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