Children’s Allowances: Questions & Answers

Parents/guardians may choose to provide their children with an allowance to help them learn how to manage money. An allowance, combined with financial education, can help children learn to prioritize their spending, save for future goals and learn about financial responsibility.
An allowance can be a difficult thing to start because there are many questions about how much to give and how to provide an allowance. The following are some questions and answers parents/guardians may have about allowances:
What should an allowance be used for?

One common approach is to break up an allowance into three categories: spending, saving and sharing. Spending money can be used for occasional impulse purchases. Saving money can put towards short and long term financial goals. Help children identify items they would need to save money for. Sharing money is used to help others (donations). Talk with children about different charities they would like to donate their money to.
Will an allowance end up costing lots of money?

Regardless of whether parents/guardians are providing an allowance they are always spending money on their children. Some parents/guardians may find an allowance saves them money because it reduces the constant asking for money from their children.
What if providing children with an allowance is not in my family’s values or budget?

One of the most important aspect of teaching children financial responsibility, regardless of whether or not they are receiving an allowance, is education. Everyday activities, such as going to the store or bank, can be a great opportunity to discuss how people use money. Money concepts can be incorporated into children’s role-playing games such as playing pretend store or restaurant. Reading books about money can be a fun way to introduce conversations about the different ways people earn, save, spend and share money. Money related board games can help children learn about expenditures, taxes, insurance, opportunity costs and many financial concepts.

 

How often should I give my children an allowance?

Parents/guardians may choose to give their children a weekly, biweekly or monthly allowance. Regardless of how often you give your children an allowance, it is important to give it to them on a consistent basis as this teaches them they can count on their allowance to plan ahead and save for future purchases.

 

What age should children receive an allowance?

When to give an allowance depends greatly on the age and maturity of your children. A common age to start is around age 5 or 6 (kindergarten age). At this age, children are forming an understanding of monetary values. Giving them an allowance and teaching them how to manage this money well is a great way to help them become financially responsible adults.

 

Should an allowance be tied to chores?

Some parents/guardians are in favor of providing children with a ‘chore based’ allowance. This means, children only receive an allowance if they complete certain tasks. Advocates for a chore based allowance argue that it helps children learn responsibility and understand people need to work for money. If parents/guardians decide to give an allowance based on tasks/chores, they may choose to assign a value to each task so children know how much they will receive for completing a task. It is also important to decide whether children will receive an allowance for all household tasks or whether they are expected to do certain tasks as a member of a household and therefore will not be paid for them.
When providing a chore based allowance, determine what motivates your child. Some children may have difficulty following through on chores and as a result, may have limited access to allowance income. It is helpful to put deadlines on chores so they are done in a timely manner.
Other parents prefer to give their children an allowance that is not tied to the completion of chores. This allows the focus of the allowance to be solely on managing money and not the completion of tasks. Parents/guardians need to decide what works best for them and their family.

 

What are the alternatives to giving my child an allowance?

Common alternatives to giving your child an allowance include:
Children earning money outside of the home
Some parents/guardians encourage their children to earn money outside of the home, such as through community work (babysitting, outdoor help) or a part time job. The advantage of children earning their own money is they learn valuable skills and an understanding they need to work for money. Expecting children to earn money outside of the home may be a good option for tweens and teenagers. This may not work for young children because of their limited earning potential.
Giving children money when they ask for it
The advantage of this approach is parents/guardians have greater control over their child’s spending as they are the ones deciding if a request for money is valid. The disadvantage of this approach is the child is not making spending choices, and may have difficulty learning how to prioritize their spending.

 

How should children receive an allowance?

It is a good idea to provide young children with a cash allowance. Coins and bills are visible and tangible so they are a great way for young children to learn about money. Older children can receive an allowance through an automatic transfer into their account to simulate direct deposit paycheques.

 

How much of an allowance should children receive?

The amount to give depends on several factors including: how much parents/guardians can afford to give, the child’s age and what children are expected to do with their allowance. Start with a low amount and allow for raises if the initial amount doesn’t seem right. A lower amount also avoids a reduction which can feel like a punishment. A common approach is to provide a certain amount per week based on the age of the child (ex. $1.00/week based on the age of the child. In this scenario, a 7-year-old would receive $7.00 per week).

 

Should an allowance be withheld as punishment?

Be cautious about withholding your child’s allowance as punishment; this can lead them to think about money in a negative or punitive manner. If you are withholding money for chores that were not completed, have a discussion about what they can do in the future to regain these funds.

 

Should children receive money for doing well in school?

If you have more than one child, providing children with monetary rewards for doing well in school may cause issues if your children have different academic abilities.

 

Should children receive a clothing allowance?

At a certain point, children want to choose their own clothing styles. This may be a good time to implement a clothing allowance. Help children to create a list of necessary items so they have enough items in their wardrobe. The age at which to implement a clothing allowance varies but is usually around 12 years old or older.