5 Reasons to Give Kids an Allowance

At the foundation of your children’s financial intelligence should be this undeniable truth: It is not the amount of money you have, but what you do with it that matters. This is true for a child managing a five-dollar-a-week allowance or a corporate executive with a five-thousand dollar-a-week salary.

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For many years of my life I didn’t know this truth. On the contrary, I believed that more money was the answer. I was convinced that if we just made more money, won the lottery, or received some unexpected inheritance, all of our money problems would vanish. But the more we made the worse our problems became. Because I didn’t know how to manage what we had, more would have never been enough. We didn’t save, we didn’t give, we didn’t plan, and we had no idea where all the money went.

Unless your children learn simple, wise money management techniques, more money will never be enough.

The simplest way to get started building financial intelligence into your kids’ minds and hearts is by putting them on an allowance and then requiring them to suffer or enjoy the consequences of their financial decision.

An allowance teaches kids about real life

Nothing beats an allowance for a hands-on course in values. Having their own money teaches them about responsibility, consequences, saving and charity.

An allowance helps to distinguish needs from wants

Do they really need that new video game or those peace sign earrings? Having their own money forces kids to think about what to spend it on.

An allowance puts an end to the nickel-and-diming

You create a set budget item called “Kids’ Allowances” and that stops that constant drip, drip, drip of money flowing from your pocket to random stuff for them.

An allowance builds trustworthiness in a child

By giving kids money to manage, you demonstrate that you trust them. And they soon learn that to keep the money coming, they need to become trustworthy.

An allowance promotes self-confidence

Managing money has a magical effect on their self-esteem. Teaching kids how to give some of their allowance to charity, save some for a longterm goal and spend some now gives them the tools of self-reliance.

There are no set rules for when to start. However, I suggest waiting until kids are old enough to manage their money and understand the concept, which is usually around age 6.

How much? Though many families use age to determine the amount ($10 per week or month for a 10-year-old, for example), think about how much money your child needs.

A 6-year-old might only use a few dollars a week for ice cream or toys, while a 12-year-old will probably use more for things like movies, snacks and games.

How often? Whether it’s weekly or monthly, kids do better when you stick to a schedule.

Younger kids tend to manage their money more effectively when they get it weekly, since out of sight often means out of mind.

For older kids, consider paying monthly so they can learn about budgeting.

Work for pay? Think about your goals when it comes to the allowance-for-chores quandary. If your main goal is to teach your kids to manage money, give them a basic allowance with financial “chores” attached, such as paying for their own collectibles. If you also want to teach kids the value of working for pay, pay them for extra chores on a job-by-job basis.

No matter what the amount, encourage kids to save a given percentage, set aside a percentage for charity (they’ll learn the value of giving back), and the freedom to decide how to spend the rest.

Want to get your child’s allowance program off to a great start? Consider the Moonjar Classic Moneybox. This clever savings bank is actually three banks in one to teach children to save, spend and share their allowance.

Over the years Moonjar has received multiple awards for innovation and it’s no wonder. This money box is really well made and easy to use because kids even as young as age 4 years can understand and learn from the process. I believe this durable tin money box is a timeless gift that will inspire and teach children to save, spend and share wisely for a lifetime. About $19.

Interested in learning more great ideas for building your child’s financial literacy? Raising Financially Confident Kids by Mary Hunt, is available wherever fine books are sold.

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  • tinydogpries

    I must admit I never had the extra money to give my kids an allowance.(Single mom, low paying jobs), but I DID involve the kids in my budgeting plan (envelopes) and when he grew up my son told me that he used that method himself because he knew it worked. I like that bank, wish they would have had it when my granddaughter was growing up.

    • Mary Hunt

      You did well, TinyDogPries! Who knew that simple envelopes could be so effective! 🙂

  • eBryce

    Mary, thank you so much for all you taught me about money, and for your book “Debt-proof your Kids.” I don’t think I would be where I am today, financially, without your wisdom and advice. I grew up getting a modest allowance, and so I gave my kids a modest allowance as well. And though I did encourage them to give and save, the biggest change occurred when I was out shopping for clothes one day with my oldest (then 7th-grade) daughter. It happened when I had a little “melt-down” in Target, trying unsuccessfully to turn her attention to various sale-priced clothes. In a moment of great frustration, I finally handed her the envelope containing her clothing money for the month. “Fine!” I said, “you pick out whatever you want. That’s what I have budgeted to spend.” She was literally transformed, before my eyes, into a frugal shopper! Now that the money was hers to spend, she immediately walked over to the clearance rack. What’s more, she now saw me as an ally, and began asking me to save the sale ads, and asking for my advice. Our battles were over! I decided to expand her monthly allowance to include everything I had already been paying for, including lunch money and money for birthday presents for her friends. Though it was not any more than I had already been spending, it seemed huge to her, and she became the envy of her younger brother and sister. Getting a “big” allowance became a rite-of-passage at our house. When her younger brother was old enough to get a monthly allowance, he quickly became frugal as well, figuring that if he worked in the cafeteria, he would get a free lunch AND get to keep his lunch money. He asked me to help him study, and to take him to get a food handler’s license so he could implement his plan. My kids are all grown now, and I could not be more proud of the superb, savvy money managers they have become. Thank you, Mary!

    • Mary Hunt

      eBryce … Your story is so heart-warming but I have to say that I’m not surprised. This is the same reaction we got from our boys when they went on the HKFP (Hunt Kid Financial Plan, as you now from the book). Right from the start (well, except for that first month with Jeremy), they taught themselves to be frugal. It was almost miraculous. Jeremy is now 42, Josh 41. As opposite as they are in so many ways, when it comes to money they are wise, conservative and very savvy. Financial wisdom comes so naturally for them. And I trace that right back to when they were in grade 6 respectively. With the money we trusted them to manage, they were required to save, give (share) and then spend wisely. Oh the stories I have! Thank you so much for your comment and letting all of us know how the book I wrote about our boys and the whole plan, How to Raise Financially Responsible Kids http://amzn.to/2gbZoqR (same book, just got a name change along the way … ) impacted your family. And please let your kids know that I think they are awesome! I am so proud … of all of you! m

  • Carol Gesalman

    When my boys (I had no girls) were young, they received an allowance, 10% of which was donated to our church. They could spend the rest as they wished. If they wanted a toy they could not afford, I gave them two options: they could borrow the money from me and pay me back with interest ( a very small amount), or I would buy it and put it on “layaway” which allowed them to put so much on it every week until it was paid off (no interest) at which time they received the toy. When my boys turned 15, I quintupled their allowance and told them that they were now responsible for buying their own clothes and shoes and any food eaten outside our home. They also had to pay for dates and school activities, after giving the obligatory 10% to the church.
    Now I realize times have changed. My boys are now in their early 40s, so it’s been a while, but I still think there is value to allowing our children to budget and choose how and what to spend their money on. Thank you for your good advice, Mary.