Kids’ Allowance Q&A: The Experts Weigh In

Budgeting, Personal Finance

Most people believe that children should receive an allowance. Beyond that, there’s less of a consensus. How old should kids be before receiving an allowance? How much money is appropriate? What should they do with their money? We asked a variety of youth and financial literacy experts to weigh in and give us their opinion. Here are their answers to some of the most popular allowance concerns from parents:

Should you give your child an allowance?

“I recommend not giving a child an allowance until they’re old enough to understand basic financial concepts and old enough to begin managing the money they receive. Preschool children don’t really understand the abstract notions of money, or the difference between wants and needs. It isn’t until kids reach first and second grade in school that they begin learning about and understanding the concept of money and its value.”

– Joseph A. Peri, President of Junior Achievement of New York

How much money should kids receive?

“Kids shouldn’t be given more than they can handle or understand – but they should be given as much as they can handle. For some pre-teens, this can amount to $150 per month or more, if they are managing their own budgets for clothing, shoes, activities and fun.”

– Bret and Tracie Shroyer, authors of Investing in Your 401(k) Kid

“If the money is just for fun spending, it doesn’t matter what the amount is. If the child is expected to pay for some child-appropriate expenses (and they should) then the allowance amount needs to be adjusted to allow for the “expense” spending. A good example is giving kids control over an amount to be used for buying school supplies.”

– Lynne Finch, author of The No Cash Allowance

How should children spend their money?

“Don’t enforce your own sense of value on what your kids want to buy with their money. Remember, if they’ve earned it, it’s their money. They may buy some things that you don’t think are a good use of those dollars, but if you’re going to get them to understand the value of each dollar, they have to be able to make their own spending decisions and spending mistakes.”

– Dana Obleman, mother of three and author of Kids: The Manual

How should children save?

“Setting up a savings account and a joint checking account can provide teachable moments about balancing accounts and the act of physically going to the bank to make a deposit into a savings account. This will help instill the long-term permanence of that habit.”

– Robert Nickell, father of seven and founder of Daddyscrubs.com

“One of the things that has made my children change their attitudes about their college-fund bank accounts was a field trip to the campus of my alma mater. We went into the buildings and looked at the classrooms. We visited the cafeteria. We discussed dorm rooms and roommates and all the fun things that happen at college. We bought t-shirts at the college bookstore. We even spoke to college personnel about what it will cost to attend the college. This helped my children (ages 10 and 13) set tangible goals for themselves. Now, instead of begrudgingly handing over their birthday money for me to put in their college funds, both of my children say, “Mom, we need to go to the bank, so we can put some of this money in our college funds.”

Chelly Wood, teacher and young adult author

Should you give your child a debit card?

“In an increasingly electronic-payment world, kids should be given access to debit cards when they’re ready (likely early teens) so that they can learn how to manage cards in their larger budget, and how to reconcile electronic spending at the end of the month. This only comes after showing proficiency handling cash and balancing their budget.”

– Bret and Tracie Shroyer, authors of Investing in Your 401(k) Kid

“For younger children, I suggest using a gift card instead. That way if it gets lost, you’ve only lost $25 out-of-pocket (or whatever amount you spend). Each of my children has a $25 gift card for Barnes and Noble. That way they’re spending money on something educational: reading material.”

Chelly Wood, public school teacher and young adult author

Do you pay an allowance in exchange for chores? Is this a good idea?

“When in the real world do we get handed money for nothing? It’s very reasonable to ask kids to have age-appropriate daily chores. In my house, we have a list of chores on the fridge, and the rule is if you don’t do your jobs, you lose money. This means that some weeks my kids don’t get their full allowance—they’re kids, they’re still learning, and they don’t always get it right. But they understand that their money is earned.”

– Dana Obleman, mother of three and author of Kids: The Manual

“The allowance should be given for doing jobs/chores/tasks above and beyond normal expectations. In other words, don’t give your 5 year-old a quarter for brushing his teeth. We expect that of every child his age. Rather, offer him the opportunity to earn the quarter for feeding the dog, emptying the trash, or clearing his dirty dishes to the kitchen sink. At the end of each week, take your child to the 99-cent store and let him choose his own prize. It’s fun!”

– Dr. Fran Walfish, author of The Self-Aware Parent

“In an uncertain economy, the likelihood of a family’s income being restricted due to joblessness is a real factor. Will this mean that kids will no longer do their chores if there is no allowance money to pay them? Some kids may think so. It’s best that chores be non-negotiable. Parents should expect kids to do their chores as members of the family unit, rather than as paid workers.”

– Joseph A. Peri, President of Junior Achievement of New York

Are allowances appropriate for teens or young adults?

” Once your child is old enough, encourage him or her to seek out a job outside of the home and discuss all of the positive benefits, such as meeting new friends and learning valuable budgeting, leadership, self-motivation and time-management skills.”

– Robert Nickell, father of seven and founder of Daddyscrubs.com 

“Allowances are very appropriate for teens. By the time a teen is in high school, he should be responsible for managing money for much of his own personal expenses, such as, school supplies and fees, entertainment, clothing, communication (mobile devices) and personal supplies. This is money parents would be spending on the teen anyway. By transferring control and management, the teen is learning valuable money management skills in those last critical years before becoming an adult, in which case financial transactions are their legal responsibility.”

– Lynne Finch, author of The No Cash Allowance