Good habits can last a lifetime – so start early in teaching your child how to handle money. One avenue of teaching is via allowance, which can provide a sense of independence, encourage saving, and teach children the cost of things.
If you’re going to give an allowance, you must decide the amount. A 2018 survey from allowance tracker RoosterMoney found that the average child aged 4-14 takes home around $8.43 a week – with most getting around $1 for each year and the amount increasing as they got older. For instance, a 6-year-old would get $6, a 7-year-old would get $7 a week and so on.
How much they get should ultimately be based on your values and family budget – as well as what you expect them to buy and your area’s cost of living. Here’s a few approaches that can help you decide.
Give allowance based on chores
It’s simple: when your child does chores, they get paid. No chores means no money. This approach has several advantages, including teaching that money requires work. It also helps them make choices and learn consequences. For example, if they choose not to do the dishes, they don’t get the money wanted to buy a new toy. Be aware, though, that this approach can also suggest that they don’t have to do chores — that chores are a choice.
Chore-based allowance can also be seen as a reward for doing things that your kids should do anyway: cleaning up after themselves and helping around the house. One way to deal with this is to decide which chores are tied to allowance and which tasks (such as putting dirty clothes in the hamper) are expectations and not options.
Give a consistent allowance
Another approach is to give kids an allowance each week no matter what. Separately, they are expected to do their chores and help around the house because they are part of the family. There is no link to allowance and work. With this approach, your child has money no matter what – so they can gain firsthand experience with real money. You can also reinforce that chores are something they are expected to do because they are part of the family. However, with this approach, some children may take away the idea that money will always be available and handed to them.
Use a hybrid approach
There’s also a third option. Give your child a set amount of money each week as allowance, which is not tied to any chore or job. Make it clear that, as part of the family, they are expected to do certain daily chores like clearing up their dishes and cleaning up their toys. Then, if your child wants to earn additional money, they can do other jobs around the house. These should be different from the daily chores they are always expected to do. Some examples would be cleaning windows, raking leaves, giving the dog a bath or raking the leaves.
Six smart practices for any amount
Regardless of how much you decide to give your kids, these allowance practices will be helpful in teaching your child the right behaviors and attitudes.
- Set boundaries. Make clear to your child the types of purchases you expect him or her to make with allowance, versus what you will pay for.
- Encourage saving. Talk about the benefits of saving. You may consider giving a smaller amount more frequently (for example, $5 each Saturday versus $20 once a month) to encourage saving. You could also consider giving a bonus – for example, when your child saves up $40, give them an extra $5.
- Use cash. For younger children, always give them allowance in cash and coins. It's easier for a child to learn about money if they are working with the tangible kind. A clear jar or see-through piggy bank can also be used so they can see their money physically grow. When your child is older, consider a credit union account – Patelco offers a youth checking account as well as a high-interest Money Market account.
- Be consistent. Stick to a regular schedule and give your child the same amount of money on the same day each week or month. This will help them learn how to plan.
- Consider raises. If your child handles their allowance well, consider giving an allowance "raise" as a reward.
- Keep allowance positive. Don’t use allowance as a punishment. If your child misbehaves, don’t take away their money that week. Because allowance is children’s first hands-on experience with money, you don’t want it to cause them anxiety. There are plenty of other ways to punish your child by taking away privileges, electronics and toys.
Source: Broadridge Financial Solutions, accessed October 18, 2019.