Should You Give Your Child an Allowance?
By the time a child is three years old, they can start to understand the concept of money according to several university studies. Does that mean it’s time to start an allowance?
Doing research on the topic led to me numerous reports, blogs, and videos on giving children an allowance and why. The “13th Annual Parents, Kids and Money Survey” by T. Rowe Price reports that 75% of parents are giving their child or children an allowance and the median amount is $19.70 per week. Boy, am I out of date!
Giving your child an allowance is one thing, but the reasons why vary. Some parents reward doing chores or attaining good grades in school. Others just give an allowance as an opportunity to teach the concepts of saving and spending money. It looks like this parental decision begins about a child’s age 3 and most parents are giving a child an allowance by age 7.
However, there is a distinct minority group of parents who do not give their children an allowance. Some because they believe they cannot afford it, and others because they espouse a different value system. TV star Mayim Bialik has her views that children don’t need an allowance and can learn about money through example. After a funny start, she begins to detail her opinion at 45 seconds into the video to explain why.
How much should you give as an allowance is a frequent topic among parents, blogs, and YouTube videos. The simple approach seems to match age with the weekly dollar amount. The 7-year-old gets $7 a week. Dave Ramsey, popular personal finance guru, thinks you should put your child on commission – the harder the job the more they make. That might work well with school grades on a sliding scale. Still, others feel that need should enter the picture and fund school extras, trips, and impulse purchases as a method to provide money at a particular level.
Where the money is saved has changed since my days of going to the Bank of America with my savings account passbook to make my weekly deposit. Online has arrived. The number of apps is multiplying, and some don’t even require a bank account. Here’s a summary article from Forbes.com.
Still useful, are the 3 Jars labeled Spend, Save, and Share. Here’s my recent video on this topic:
However, you have to transport the contents to the store, bank, or charity to make your deposit or purchase.
We in the personal finance education business feel that money habits should be created as early as possible and that children understand the value of the dollar as it relates to spending and saving. Allowances provide an opportunity to set expectations of how money is earned and used and that experience will last a lifetime. An allowance can do that, but also there are other approaches that can be useful too. It just takes time and a desire to make our children money smart.