Allowance: Who Lives Better? You or Your Kids?

Allowance: Who Lives Better? You or Your Kids?

Allowances are always a hot topic among parents. Some parents are for them while others are not. I am all for children earning money but I’m not a fan of allowances that function as essentially entitlement programs. When people ask me what my thoughts are on allowance, my initial response is always, “What are you paying them for?”

Too often parents give money without it being earned or on demand. This is a bad habit for both parents and kids. While it may make sense to occasionally give your child money upon request, it’s another thing to hand them cash every time they ask.

The American Institute of CPAs surveyed parents on allowance and put together this great infographic. I found the results fascinating and a bit surprising.

Kids Allowance #Infographic

81% of Parents Said They Discuss Money Management with Their Kids.

At first blush, this makes me happy, but it also seems high to me. I am curious as to how they defined money management. Is it telling your kids not to spend all your money at once? Or do 81% of parents sit down with their kids and truly talk to them about how to make good decisions with their allowance?

The average yearly allowance totals $780 a year or $15 a week.

This is a generous allowance and I have no problem with this amount if:

A) Parents can afford and budget for it. For 2 kids, that’s $1,560 a year.
B) The kids have earned that $15 and it’s just not given.

Allowance can be a great way for kids to gain hands-on money experience, but it does them little good if you give more than you can afford and they do nothing to earn it.

Teach Kids Money is Earned, Not Given

We set clear expectations with Lauren and Taylor on what it means to be a good citizen in our home. They know that they need to keep their bedroom clean, make their bed, bring dirty dishes to the sink and so forth. We do not pay them for doing those tasks.

Because I do believe that children need to have the opportunity to earn money, I post a Weekly Job List. The girls can choose which jobs to accept and control how much they earn. They immediately allocate their earnings to their save, spend and share goals.

Tip: Make sure kids understand that money needs a purpose. We give our money purpose through our save, spend and share goals.

Do You Know How Much Your Children Earn?

I suspect most parents haven’t added up how much they give their kids in allowance on an annual basis. The weekly amount seems reasonable and parents let their kids spend it as they please. Of course, when you see the yearly total, you may wonder why your kids can’t buy the new iPhone 6 or the designer jeans they want themselves.

While I believe kids should absolutely have a say in how their money is used, we, as parents, also need to guide them as to how to use that money wisely. My guess is most kids (and parents) don’t know how their allowance was spent. And mindless spending is a bad habit to form at any age. An allowance can be a great way to help your child form good money habits and beliefs, but that only happens if you help them.

Tip: Teach kids to budget their allowance. Help your kids (especially older kids) look at their allowance from a weekly, monthly and yearly perspective because $15 looks different than $780. How do they want to use their money? If they want something big, like a new iPhone, they may think it’s impossible because they haven’t looked at the big picture. Help them figure out what their priorities are and how to balance their budget.

What surprised you the most? Do you give your kids allowance?


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October 10, 2014  •  27 Comments  •  infographic

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  1. Friday, October 10th, 2014
    That seems like an awfully high number to me. You're right in that it's probably a one off comment like, "ok you should save" or "spend responsibly." I'd almost take it a step further if kids are old enough and pay them, but start taking money back for taxes, social security, etc. lol! I mean hey why not right? It will happen sooner or later!
    • Shannon Ryan
      Sunday, October 12th, 2014
      Yes, I suspect that it's more one-off comments versus actually in-depth conversations around how to manage money and make good decisions with it. One that always surprises kids is when they earn their first "real" paycheck and see how much goes to go the government. It's good to prepare them for that reality.
  2. Friday, October 10th, 2014
    Okay, I'm calling bluff on this 81%! :) Not by the standards of parents I see. Unless "money management" includes complaining about being broke.. I really like your two points about having to afford the allowance and having to earn it. These are key points that I think are essential for an allowance system to be in place.
    • Shannon Ryan
      Sunday, October 12th, 2014
      Yes, I thought it seemed very high too, although I hope someday to see it truly be that high. Allowance for many is a rite of passage but if you're going to give your kids money you need to be able to afford it. Seems simple but many parents don't actually realize that it does add up to a fair amount of money.
  3. Friday, October 10th, 2014
    Holy crap! $15 a week, wow! My wife and I do regular tasks around the house and we don't pay ourselves for that and so we don't pay our child either. Now if she helps us weed the flower beds or do something out of the ordinary like clean the basement then she can earn money, but just giving money to give money is not good enough for our house. Helping each other is something we should do and not expect compensation.
    • Shannon Ryan
      Sunday, October 12th, 2014
      We're the same way, Lance. We have the basic household tasks that we expect Lauren and Taylor to do without compensation. Then we have paid jobs, outside of their normal responsibilities, that they can elect to do. It's a system that works well for us.
  4. Friday, October 10th, 2014
    Hmm $15 a week seems a bit high, but EVERYTHING is expensive these days. It would take a month for a kid to save up enough for a new video game, let alone a video game system. When I have them I will definitely give my kids allowance.
    • Shannon Ryan
      Sunday, October 12th, 2014
      Very true, DC! Everything is expensive these days and I suspect the $15 is probably going to more of a pre-teen/teen versus a young child too. To me, what's important is helping a pre-teen/teen to consider both the big picture, the annual amount the earn, and the weekly amount. So they can figure out how to use it wisely, a video game system is absolutely doable, but it will likely take up half their earnings. Is it worth that much to me? And if so, what will they do with the rest? It's about making mindful choices.
  5. Friday, October 10th, 2014
    $15 is pretty generous indeed! I had a small allowance growing up, but anything fancy we had to either save or work for. So I worked hard and probably around age 15 my parents said "ok, you make too much money to get an allowance!". It was icing on the cake but I never thought of it as my only source of income.
    • Shannon Ryan
      Sunday, October 12th, 2014
      You were very entrepreneurial as a teen, Pauline and it's been a huge benefit to you as an adult. It's skill we don't always encourage in our kids, but one that can make a huge difference in their lives.
  6. Friday, October 10th, 2014
    The amount of the allowance probably depends on how old the child is. Having a allowance is probably a good way for kids to learn how to manage their money. My son is not old enough to do chores or to get an allowance yet, but my wife and I have already started thinking about it. I think it's important that kids do errands and help out. However, I've heard there's a debate as to whether allowance should be tied to doing chores. Would kids expect money every time they help out? They should help out regardless of earning an allowance as part of the family.
    • Shannon Ryan
      Sunday, October 12th, 2014
      Definitely, Andrew. I suspect the amount is more likely for a pre-teen/teen versus a small child. The girls have basic household chores that they are expected to do as members of the family without compensation. These are the things my husband and I do ourselves, such as clean up after ourselves, take our dishes to the sink, make our beds, etc. Then we create a separate job list of the things they can choose to do and will be compensated for, providing they do a good job. I agree that you don't want to set the expectation that they should get paid every time they do something. Some things you simply do. We call it being good citizen of our home.
  7. Friday, October 10th, 2014
    We do give our kids an allowance but it isn't tied to work. They each get $50/month. This money is to be used for anything they might need during the month like hair cuts, gifts for Birthdays, school dances, etc. They have total control of how they spend it. I'm hoping they will learn valuable lessons with their money while they are young and the consequences are minimal. For example, my son chose to buy a new video game at the beginning of the month which used most of his allowance. His hair is getting incredibly long and there is a school dance coming up that I know he wants to attend. If he doesn't have the funds, he won't be able to go ...
    • Shannon Ryan
      Sunday, October 12th, 2014
      It's great that you've made it very clear to your kids what their allowance is expected to cover for the month, such as haircuts, fun with friends and gifts. You give them latitude but also don't replenish on demand, which is important. I see many parents who give their kids money when they run out.
  8. Saturday, October 11th, 2014
    I think it's important to make sure that an allowance is tied to work done. I've seen kids with an entitlement mentality and that's just not what we want for our daughter. One of our most important goals as her parents is to help her have a healthy relationship with money , since that is so very important in adulthood.

    The 81% seems high to me too- I'd be surprised if it was much more than a single comment made.
    • Shannon Ryan
      Sunday, October 12th, 2014
      Yes, when money is given on demand, it is easy for kids to develop an entitlement mentality. And in the real world, it doesn't that work that way. Some young adults really struggle with living within their means when they go out on their own because they are used to be given more money when needed. Helping my daughters form a healthy relationship with their money is one of my top priorities too, Dee. I'm glad to hear it's one of yours too!
  9. Saturday, October 11th, 2014
    Wow--$15 a week seems really high to me! I didn't get an allowance as a kid, but I could do little chores/jobs around the house to earn money. My parents would assign a dollar (usually cents) value to each task and I could sign up to do whichever chores I wanted. This netted me about $1 per week, which I was pretty happy with as a kid :)
    • Shannon Ryan
      Sunday, October 12th, 2014
      It seemed a bit high too me, although I suspect it is probably for a pre-teen/teen rather than a very young child. We do something similar with our girls and they really like it. They have control over how much they earn and this Mom loves it when her kids ask her for more ways to earn money, rather than being begged to buy it for them.
  10. Saturday, October 11th, 2014
    I am okay with the thought of giving an allowance. But that would not be included in the outside responsibilities that my children would have on normal up keep of the house.
    • Shannon Ryan
      Sunday, October 12th, 2014
      I agree, Michelle. The girls know their are chores that are consider basic responsibilities that they must do and will not be compensated for doing. We keep the jobs they can earn money for doing very separate so there is no confusion.
  11. Sunday, October 12th, 2014
    I am not a fan of allowances, but we just started giving one to our daughter. It was mainly so she could pick and choose the things she wants to buy at school with all the fundraisers and extra things that pop up. I got tired of saying no, so we are giving her $20 per month as long as she does her assigned chores and does well in school. 20% has to go to savings and she can spend or save the rest. So far, it's been a good exercise.
    • Shannon Ryan
      Sunday, October 12th, 2014
      Sounds like a good plan. It gives her control and removes you from being the bad guy. She can figure out where she wants to spend her money (and I know how much you love those school fundraisers!) and it's not "free" money either. It still has to be earned.
  12. Monday, October 13th, 2014
    Really? $15 a week? I am not a father yet, but I am married. I don't know how I and my wife would be able to manage it and teach our kids about this delicate topic. But, I am planning to be strict when it comes to allowances. I have to teach them the value of money and how money is earned.
    • Shannon Ryan
      Tuesday, October 14th, 2014
      I definitely think it's important to make sure whatever allowance you choose to give your kids is something you can afford. Otherwise, you're really doing more harm than good if you have to go into debt to give your kids money. Allowance can definitely be an effective way to teach kids that money is earned and give them hands-on experience with managing money, both are important lessons.
  13. Tuesday, October 14th, 2014
    My brother and I got about $5/week when we were kids, until about age 10-11, then it went up to $10/week. But, we only got this money if we did all of our assigned chores each week.
  14. Thursday, October 16th, 2014
    Hi Shannon,

    I definitely am against giving money for doing things like cleaning their room or taking out the trash. To me, they live here so they have to pitch in.

    My kids have done the "clean my room for money or for extra curfew" but they stopped after they realized I wasn't budging :).

    I really enjoyed the infographic....very eye opening :). My son who just graduated is in between jobs so he's doing extra stuff around the house for money. We were talking about his monthly expense (his part of the cell phone bill) and what to do with his weekly earnings. The funny part was he was expecting to make about $10 an hour. I couldn't help it, I had to laugh ;).

    Great post Shannon! I'm going to pass along. I hope you've had a great week! Hope all is well!

  15. Thursday, October 16th, 2014
    We have stopped doing allowance and now post jobs like you suggest. How do you encourage them to save and share their money? They only seem motivated by their spend goals. And honestly, the thought of managing another process or project is overwhelming. How do you do it so it's seamless and easy in your daily life.
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    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan