An amount of money that parents routinely give to kids for them to spend and save as they wish.

Often used to teach kids about money management, saving, and budgeting.

Sometimes an allowance is tied to performing chores in order to teach kids work ethic and about earning money.


What is an Allowance?

An allowance is a set amount of money given to children by their parents or guardians, often on a regular basis.

It's not just pocket money, but a tool for teaching financial responsibility and money management from a young age.

It's one of the first tools parents use to teach good money habits to their kids.

An allowance is more than just spending money handed over to kids.

It's one of the first tools parents use to teach good money habits to their kids.

It involves giving children a predetermined amount of money, either regularly or as a reward for completing tasks.

The kids get to own, manage, and spend their money, within certain limits set by parents.

Pros of Giving an Allowance:

  1. Fosters Independence: Children learn to make decisions about how they'll spend or save their money, which fosters a sense of independence.
  2. Teaches Budgeting: Managing an allowance requires kids to plan and prioritize their spending, which is a fundamental budgeting skill.
  3. Encourages Saving: By saving a portion of their allowance, children can work towards a goal, understanding the value of delayed gratification.
  4. Introduces Money Management: Regular allowances give children the chance to handle physical money or digital equivalents, teaching them essential management skills.

Cons of Giving an Allowance:

  1. Entitlement Issues: There's a risk that children might start to feel entitled to money without understanding the work that goes into earning it.
  2. Mismanagement: Without proper guidance, children might develop poor spending habits.
  3. Financial Disparities: Within peer groups, differences in allowance amounts can lead to social issues among children.

An allowance can be a powerful teaching tool.

By providing children with their own money, you're giving them a low-risk environment to learn financial responsibility.

They can experiment with spending and saving, and learn from their mistakes without facing real-world consequences.

Moreover, allowances paired with regular discussions about money can lay the groundwork for financially savvy adults.

This experience is really important for kids as they learn to be smart with money and handle real-life money situations when they grow up.

How Many Parents Give Their Kids an Allowance?

The custom of providing children with an allowance is common.

In the US, roughly two-thirds of parents give an allowance.

However, it's interesting to note that there's a strong preference for earned allowances over simply gifting money.

In the US, roughly two-thirds of parents give an allowance.

According to one AICPA survey, 80% of parents who give an allowance expect their children to earn it through chores.

Only a smaller portion of parents believe in giving an allowance without requiring work in return.

This trend towards earned allowances highlights the emphasis on teaching the value of hard work and financial responsibility.

Paying for chores is a great way for kids to make money on their own.

Best Allowance Method for Kids

Selecting your preferred method depends on the values and financial lessons you wish to impart to your children.

Each approach comes with its own set of teachings and outcomes.

Monthly and Weekly Allowance

This approach provides children with a reliable source of money, reflecting a regular income similar to a salary.

It teaches them about the predictability of budgeting and the importance of planning their spending in line with regular income intervals.

Allowance for Chores

Linking allowance to chores mimics the real-world concept of work for pay, instilling an understanding of the effort required to earn money.

It reinforces the idea that money is a result of hard work and is not simply given.

Regular Allowance vs. Paying for Chores

A regular allowance, not tied to chores, allows children to focus on money management. When only paying for chores, there's a risk the focus will be on finishing tasks quickly, as opposed to managing money.

In contrast, paying for chores can provide motivation for contributing to household responsibilities and underscores the work-reward relationship.

Each method offers different lessons. You can always combine the two.

The debate between a gifted allowance and an earned allowance continues.

Each method offers different lessons.

You can always combine the two.

Set a lower weekly allowance, and offer "bonus" money for completing chores.

What Age Should You Start Giving Kids Allowance?

You should start giving kids an allowance when they're about 5 to 7 years old.

That's when kids usually start to understand what money is.

You can start giving kids an allowance when they're about 5 to 7 years old.

At this age, they can learn to count money and know that it's used to buy things.

It's a great way to help them learn about money early on.

How Much Should Allowance Be?

When deciding how much allowance to give, a simple rule of thumb is to give $1-2 for every year of your child's age each week.

For example, a 7-year-old could get between $7-14 a week.

If you pay for chores, you could offer a certain amount for each chore or an hourly rate, like $4 to $6 per hour.

The exact amount can depend on what you think is right for your family and how old your child is.

a simple rule of thumb is to give $1-2 for every year of your child's age

There's no obligation to give any amount, and any amount will serve the purpose of teaching your kids about money.

It's easiest to start learning with cash at younger ages.

Use piggy banks as a fun and visual way for kids to see their savings grow.

As kids grow up, transition them to debit cards or allowance apps.

That way they're ready to use digital money like most adults do.

Average Allowance by Age

Kids usually get more allowance as they get older.

Little kids, like 4 or 5 years old, might get a few dollars every week.

When they become teenagers, they might get more money because they understand more about spending and saving.

The averages align with our rule of thumb - about $1-2 for every year of a child's age.

Allowance Apps for Kids

Allowance apps are handy because a lot of people don't use cash these days.

They're great for older kids who need to learn about digital money.

But for younger kids, using real cash can be better because it's easier for them to see and understand.

As they get older, you can start using allowance apps to help them learn about managing money online, just like adults do.

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