When to Start Giving Your Child an Allowance

Filed under: Work Life


An allowance can teach kids a lot about money. Credit: Karen Bleier, AFP/Getty Images

Giving kids an allowance has long been associated with also giving them chores, but some say tying a regular sum of money to rewards or punishments can be detrimental to a child's future financial health.

Amy McCready, a mom of two and founder of Positive Parenting Solutions Inc., says using money given in the form of an allowance can help kids build a healthy lifelong relationship with money and also help them develop general life skills.

Kids as young as 4 or 5 years old may have a very basic understanding of money, but are still ready to receive an allowance, McCready says, and the amount given should be determined by asking yourself three basic questions:

  1. What do I expect him/her to buy with an allowance? Is it for savings, charitable contributions, lunch, spending , activities?
  2. How much money will he/she reasonably need to do that? In the teenage years, consider giving a lump sum (not too much) for the purpose of buying clothes. The child can make the decision on how that money is spent.
  3. How much will make him/her just slightly uncomfortable? Give them just enough to provide an incentive to work hard to earn more.

Once you've made a decision on how much of an allowance to give your child, McCready suggests parents resist the temptation to tie the money to "chores." Instead, consider renaming chores "family contributions."

"It may sound like semantics, but using the words 'family contributions' provides a consistent reminder that every member of the family must contribute to the overall welfare of the family," she says. "Even the youngest members of the family can contribute by putting napkins on the table, turning off light switches, etc."

Offer your child the opportunity to earn extra cash by doing work that goes above and beyond the expected family contributions. Let him or her clean the garage, rake leaves or do heavier cleaning.

"The jobs should deliver a significant contribution to the family and be outside his normal responsibilities," McCready says. "The opportunity to earn additional money by doing more is because he demonstrates that he is more capable, more sufficient and more skilled."

Finally, McCready advises parents to avoid nagging their child about work that isn't completed.

"You will lay out the opportunities for earning additional income and your child has an option to do them or not," she says. "When the extra jobs are fully completed, then he'll be paid the extra amount. If he wants to do them, that's great. If not, that's fine, but he won't be paid."

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AdviceMama Says:
Start by teaching him that it is safe to do so.