Teaching kids about money is a life skill that will last longer than, say, trigonometry or quantum physics (unless they want to be an astronaut). One of the first ways that many parents help their kids learn about money is by implementing an allowance system. Setting up an allowance for kids helps them learn how to budget and teaches them about choices, alternatives, and consequences. In short, your children come to realize that, no, money doesn’t grow on trees.
While educating your children on financial responsibility is valuable (#PunIntended), you should keep certain things in mind. For example, how much money will you give to your kids and for what? Do tweens make more money than elementary-aged children? Does the amount of money matter to you, or are you more interested in teaching them the difference between saving and spending? If you’re thinking of giving an allowance to your kids, here are a few things to consider.
What’s a good place to start with an allowance for kids?
If you’d like to offer your kids an allowance, you should first consider your reasons for doing so. For example, do you want them to understand the importance of work ethic? Do you want them to learn how to save or spend wisely?
Giving your child an allowance teaches them the importance of budgeting and finding a balance between what they want, need, and can get later. It shows kids the importance of saving for tomorrow and helps them become more goal-oriented. Giving your child an allowance also instills in them a sense of independence. Clarifying why you want to offer your children an allowance helps determine both the amount of money you’ll pay and what you will pay them for.
What will your kids do to earn an allowance?
It’s your decision whether you will have a “set wage” for your kids or if you will pay per “job.” Some parents like to give their kids a daily allowance that they can earn however you decide. However, some parents might prefer attaching a dollar value to a chore. For example, washing dishes for the week might be $4, mowing the lawn might be $5, and taking the garbage out might $2, etc. You let the kids decide which “job” they want to do, and their “wage” will reflect that.
Using this method could help motivate kids to be more proactive in taking on chores. But this plan does have its drawbacks. If you have a mini mogul on your hands, they might want to sign for every job possible, and before you know it, you’re paying out of pocket more money than you intended. It could also mean that one child is racking up more allowance money than the other by doing all of the chores, which could cause some definite sibling rivalry.
Another thing to consider? Whether you want to offer allowance as an incentive for achievements in addition to or rather than household chores. For example, do you want to use the money to motivate your kids to study more? To get good grades? To try out for more extracurricular activities? Of course, the downside of this is your children being more focused on receiving money than actually wanting to do well academically. This could prove a disservice to them, too, as they leave high school and head to college without their allowance to incentivize academic goals.
How much allowance do you want to pay your kids?
There are varying statistics, but on average, kids in the U.S. get $30 per week, or roughly $120 per month, which adds up to $1,440 a year.
By age, the average allowance for kids breaks down differently. Here’s a quick comparison of weekly allowance ranges for kids aged four to 14, according to RoosterMoney (keep in mind that these rates fluctuate with inflation like everything else):
- Age four: $3.97
- Age five: $4.89
- Age six: $5.81
- Age seven: $7.30
- Age eight: $7.66
- Age nine: $8.20
- Age 10: $9
- Age 11: $10.10
- Age 12: $10.96
- Age 13: $12.10
- Age 14: $13.34
Allowance rates are also known to increase during special occasions like birthdays and holidays (Christmas, Hanukkah).
Giving an allowance is a great way to open up a dialogue about money with your children. Just be sure to discuss budgeting with them and what you expect them to cover with their pocket money. Your kids will become little financial wizards, which isn’t a bad thing at all.
What is a kids allowance app?
Looking for a way to better manage your kids’ allowance? Make it simple and get an app to do it for you. Below are a few money management programs designed to help and teach kids to handle their allowance.
gohenry: This program is designed for ages six to 18. It helps kids save and manage their finances. Your child will have access to a debit card you can control through the app. Parents can digitally send their kids allowance and set limits on their spending.
Greenlight: The Greenlight app is a great tool for the entire family. Not only are parents given the virtual tools to handle their child’s money, but it also teaches kids about spending, saving, earning, and giving.
FamZoo. Like most allowance apps, FamZoo helps kids track their money and even offers a debit card. This program also teaches children good saving habits like separating their money into different accounts. FamZoo helps kids set up a spending, savings, and giving pot to help manage their money better. Kids can also set up automated payments for “bills” like their video game or music app subscription.
Tips for Parents on Giving Allowance
Having allowance is a huge responsibility and in order for it to work for everyone, it needs to be managed properly by both the child and parents. Here are a few tips to help make this financial process a breeze.
- Talk to your child about setting goals. It’s nice to have money in the bank, but it’s important for your kid to have a plan for their funds. That way they can set tangible financial goals.
- Avoid giving your child an advance on their allowance. One of the goals of giving your child this financial responsibility is to help them understand what it means to save and earn the things they want.
- Choose a payday and stick with it.