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Keri Maughan > Blog > Allowance


 With the last few years of financial hardship experienced in our economy, we have seen many families – young & not so young – struggle to handle the difficulties that come with being inexperienced and uneducated in life’s lessons of successful money management. As parents our job is to teach our children and offer them the opportunity to learn tools and skills that will help them to be resourceful, respectful and responsible in life. One of those tools should be financial management.

  1. How do I know my child is ready for an allowance?
    Generally we recommend that allowances begin somewhere around the age of 3 or 4. This is when you start a home “economy” so that children can learn how to manage money. We recommend giving children two dollars per month per year of life (i.e. a 5 year old would get $10 per month), paid on a weekly basis. Of course, parents with limited resources may need to modify the amount paid.
  2. How do I explain the concept of allowance to my kids?
    We recommend explaining that the reason they receive an allowance is because of the simple fact that we all benefit from the contributions that we make to the family. Some contributions exist in the form of jobs (like teaching children how to be ready for the grown-up world) or chores, our value system: like being responsible to tell the truth, trusting each other, being supportive and kind, etc. The result of our contributions are benefits such as having a place to live and food to eat; learning how to work hard, (how to cook & clean, be organized and follow through on a specific task given) and feel good about who we are. Allowance gives us money to manage – so that we learn how to budget and spend it wisely; and see its’ impact on other resources, including our time. Children also come to learn about the things that are privileges like going on vacations, driving a vehicle and having extra time available for special activities.
  3. Should an allowance be tied to specific chores or behavior?
    An allowance is designed to teach kids to manage money. Chores are designed to help a child learn how to contribute to the family. Allowance shouldn’t be tied to chores because we want our children to contribute in more ways that just chores. In regards to allowance being tied to behavior: allowance can be used if a child fails to do a chore and a parent needs to pitch in to get the chore done after the allotted time frame has expired. The parent can then charge the child for the chore and collect from the allowance.
  4. Should a parent try to influence how their child spends allowance money or should they just let them “waste” it?

Teaching is the important concept in allowance! Therefore, modeling what we want to teach our kids is of great importance; that’s why starting from such a young age is so critical. Parents should try to teach kids how a finance economy works – what a 401K looks like, why you may donate to charity or a church, what saving for short term goal looks like, what long term saving for an investment is and what “spending money” is. Helping to set those up is really important –whether with a bank using a bank account or a piggy bank at home.
Once they have their “spending money” left over, parents should model how they spend their disposable income. This will help them learn by the parents’ example. They will also learn through family discussions on how to spend money. Once the teaching has occurred, we believe in allowing them to make the choice and decision to spend that money and learn from the consequences (good or bad). Parents should provide enough opportunities so that those learning consequences can come. When they are young, if they are willing, you can walk through the possible consequences; for example a poorly made toy that may break the day they buy it. When kids get older, they may or may not want to have the conversation – don’t force it.

  1. What expenses should kids cover?
    Once kids start getting an allowance, they should cover things like their own friends birthday presents, treats at the movies, and little store items that they may want to get – things for their own entertainment. As they get older and their needs increase, the allowance should also expand. One thing we highly recommend is “chores for hire” (chores that don’t need to be done weekly or maybe a one-time project) . If a child wants to increase their money to draw from, they can always earn from the “chores for hire” list. It’s important to remember that chores for hire are only available after their individual chores have been completed.

When parents provide a home “economy” to practice using money tools and skills while they are still living at home, children are then able to better learn the value of money, how to budget, save and spend wisely. This helps them be better prepared for the real world.


Take Care,