When it comes to kids and money, there are few topics that cause more confusion for parents than allowances. When should you start? Should it depend on the completion of chores? If you give too little, are you a scrooge? If you give too much, will your kids become brats?
Alas, most parents, acting on their own or following the lead of others, get allowances wrong. They start too late, they hand over too little money and responsibility, and they tie the money to the completion of household tasks while asking nowhere near enough in the way of household cooperation. In short, they don’t focus enough on how their kids use money, nor do they push them hard enough around the house, rendering their adult-making efforts wholly half-assed.
This is no big surprise, given how little time parents think about their kids’ relationship with money. For families with above-average household income—the ones with the luxury of asking themselves questions about things like allowances—money talk has traditionally been optional. Parents tell inquisitive kids that the answers to their questions about family finances are none of their business, or they divert the conversation in order to protect children from all of that money stuff for as long as possible.
But in an era in which teenagers make six-figure decisions about college and five-figure ones about how much student-loan debt to take on, the greatest act of protection we can commit is to talk to our children about money a lot more often. And that starts with getting allowance right from the get-go.
When Should I Start?
As soon as your kids start asking about money, since studies show they’re already sizing other children during their preschool years. The child-development Ph.D.s who work behind the scenes at Sesame Street determined that preschool-age kids can distinguish between wants and needs (and Elmo told me as much when I interviewed him several years ago). So that’s not a bad time to start.
If not then, do it right after the tooth fairy comes. Kids will find money under the pillow, sense its power, and want more. Rather than have them try to pull out additional teeth, as some do, best to begin allowance that same week.
How Much Should Allowance Be?
Start with a dollar a week or so per year of age, and divide the money among three containers: save, spend, and give. This is a rough approximation of an adult budget, so it’s literally foundational.
More importantly, the jars are stand-ins for the values that we hope to imprint through conversations about money. Spending is about modesty, thrift, and the prudence to shell out (and even splurge) for things that bring kids the most joy while avoiding mindless outlays for plastic junk they will quickly break or forget. Saving instills patience in a world that increasingly conspires against waiting, delivering television without commercials and movies without Blockbuster. And giving is about generosity as well as gratitude for how lucky you are to be able to help others.
Allowance should eventually go up—way up, if you can afford it. Kids crave responsibility, and we should heap it upon them starting at age 10 or so. Try setting a clothing budget each July, item by item, depending on what you’re willing to pay for in each category. Maybe yours is a Target family for briefs and panties, but you shell out for Hunter boots and Patagonia coats. If so, say so, so kids know how and why you’re making each decision.
Once you know the entire budget, hand it over in a lump sum. Do the same for athletic equipment, musical instruments, art supplies, and anything else you’ve deemed a need. Then, stand back and watch them fail spectacularly. No bailouts; you should want them to feel their mistakes deeply and earn money to solve their problems if need be. Better now than at age 24, when errors lead to wrecked credit scores and worse.
Allowance amounts can vary, but here’s the big idea: Give your kids just enough so that they can get some of what they want but not so much that they don’t have to make a lot of difficult trade-offs. Let them own those, so they know what it’s like to make financial decisions that resemble grown-up ones.
But Why Even Bother?
Allowance is instructional, and money is a tool for learning. We don’t yank kids’ books or art supplies when they don’t finish their chores (or don’t do them well, or whine while doing them), so we shouldn’t take money away either.
Most parents link chores and allowance. If you do, there will come a point when your kids have enough money and decline to do chores. What are you going to do then? Sure, leverage is important. But far better to take privileges away than money when kids neglect their tasks. Screen time, car keys, and soccer practice are all things they get or get to do because we let them. Most kids value at least one of these far more than money.
And by the way, we should make them do way more chores. Kids are capable of more than we think; if you know farm families, where kids drive tractors and handle guns at age 5, then you get this already. If not, watch MasterChef Junior, which makes a compelling case for why 9-year-olds should be cooking dinner nightly.
So kids should do chores for free, same as parents. Yes, they should eventually have the experience of working for a wage before they go to college, but save it for their teenage years, when they can have a real boss who cares not a lick for them and will fire them for being late or copping an attitude.
There are more ways we can use money to imprint values, including bringing the kids in on family charity conversations and making them pay for their first semester of college tuition. But it begins with just a few bucks each week and the freedom to experiment—even if we don’t like their choices.