Hi Taylor – My husband and I have never given our kids an allowance before. With the school year about to start and them getting more independent, I’m wondering if now might be a good time. Any thoughts on that? – Pat
Hey Pat – I get the allowance question all the time, and my answer varies from person to person. In my house, we don’t give an “allowance” because I want my kids to earn money, but I don’t want them to feel like they get paid for handling simple responsibilities. That said, we find other reasons to reward our children with money because it’s really important to teach those financial lessons. For the sake of this article, we’ll keep using the word allowance and consider the reasons it’s worth considering.
–1. Teach money skills early. As long as your kids don’t view their allowance as a steady stream of free money, they’ll start learning how to manage what they have. The stakes are low—they’re not going to accidentally gamble away their retirement—but to a kid in junior high, $10 can mean a lot. They’ll have to make hard choices, like using their allowance to go see a movie or get lunch with friends. In the best case, they’ll learn that they can save up to buy lasting, valuable things. It might require a little oversight, but if a modest allowance teaches the importance of saving, that’s money well spent.
–2. Teach personal responsibility. Really, little kids don’t have to deal with the consequences of breaking and losing things. At some point, that has to change in order for a child to transition into a responsible person. In a lot of ways, putting kids in charge of their own money is a way to cultivate that responsibility. If a child uses their allowance to buy a cheap, plastic toy that immediately breaks, they’ll have to own that loss. It’s not fun, but after a few rounds of buying the wrong thing, people get a little better at avoiding bad products in flashy packaging.
–3. Put an end to “Can I have that?” Let’s be real: kids will always play some version of, “Will you buy me that?” The best we can hope for is that the expectation gets curbed, and kids having their own piggy banks is a good way to make that happen. Before they can finish asking you to buy them something, you can suggest they buy it with their own money. That opens up the conversation of how much money they have, what they’ve been spending it on, etc., etc. An allowance is always a better option than just buying a kid whatever they want, whenever they want.
The concept of an allowance and when to award one is tricky. However, making sure kids have opportunities to learn about money is very important, and I certainly encourage it. Good luck!
Taylor Kovar, CFP®
CHIEF EXECUTIVE OFFICER
