Kids' Allowance

Allowance According to Age


Perhaps the most common method of determining how much allowance to give your child is to go by the child's age.  This is a good place to start, especially with younger children, because they start small and become increasingly more responsible as they grow.  

But what does it really mean to determine allowance by age,
and how effective is it?

My Experience With Allowances

When I was young, we didn't have much money, so our allowance was only 10 cents/week.  This was 40 years ago, mind you, and I come from a family of nine.  This was back in the days when it was common practice to change into your "play clothes" when you got home from school so that your "school clothes" stayed nicer and lasted longer.  Times have changed!

Our allowance provided enough for a trip to the corner store to buy some candy or gum.  

All of us "kids" were expected to get a summer job when we were old enough, and we handled our own money from our early teen years on.  This gave us room to financially bump and scrape along while under our parents' roof.  Everyone was frugal back then, so it was the norm to continue in that vein.

Today, things are quite different!  Life has gotten much more fast-paced and more and more is expected.  Some of us "frugal-ites" from the '60s and '70s went to the other extreme with our kids because there's so much more available to us, and we want our kids to have it easier than we did.

Is that the way it should be?  I don't think so.  There's so much to learn about handling money that can only be done when money's not so easily accessible.


My Views on Allowance By Age

When I look around to see what other parents do to determine allowances, I find that the most recommended rule-of-thumb in America is a dollar per year in age every week.  

This astounds me!

What in the world are those kids spending all this money on?  

Now, if these same kids are required to buy their own clothes, school supplies, etc. it would make sense.  But are they?  I ask my kids what their friends use their allowances for, and while many are required to save some of it, none of them have any other required purchases they're responsible for.

I believe this is a great failing of the parents in teaching money management.  They are only teaching their kids that money is easy to come by, and there are no rules in managing it.  

If I have failed to see the significance of this method, I hope to be set straight.  I have yet to be corrected in my assumptions about how these large allowances are to be used.


What We've Done With Allowances

We decided to go by their age in dollars every month or more specifically, every 4 weeks, then divide that number by 4 for the weekly amount.  (For instance, an eight-year-old would receive $8 every 4 weeks, or $2/week.  With 52 weeks in a year, they end up with a "bonus" allowance in a 12-month period).

From our experience so far (and we've been doing this for quite a while now), this is enough to give them spending money, after tithe and savings, to reach any short-term goals for the things they like to purchase. Not too much, not too little.

We've Had to Learn
Some Things The Hard Way

We essentially have two sets of kids:  our boys, who are now grown and living on their own, and our girls, who are still young and living at home.

With the boys, we gave them each an allowance according to their ages per month, and required them to split the money into three categories:  giving, saving, and spending.  They did this faithfully because it was required.  One of them saved diligently for special purchases, the other spent whatever he had in his pocket on candy and soda or whatever suited his fancy.  As adults living on their own, neither one has proven to be a good money manager.  And I know this is largely my fault. 

With the girls, we have used the same allowance-to-age ratio and the three-category requirement, but upped the ante by opening their own savings accounts and matching every dollar they put into savings.  We feel it is important to be rewarded for saving, so this is where we have focused our efforts on them financially.  They also know that they are expected to invest their savings (with our help) when they've accumulated enough to do so.  This is something I really wish we had done with the boys as well.

As the kids were growing up, they would often ask me to buy something for them when we were in a store. My answer was always, "That's what your allowance is for. Is that what you'd want to spend your money on?" Initially, the answer was yes, but if we left the store and I gave them the opportunity to go back another time and buy it with their own money, they usually declined. The lesson here is to learn to delay gratification for the more important things, and avoid the habit of impulse spending.  

W
hat your children receive in allowance should be sufficient for them, while also teaching them to make choices and not overindulge. 


The Formula Should Change
Once They Reach The Teen Years

Because experience has shown us that the 3-category requirement for money management only proves helpful when they're young, I believe it's crucial to change your method once your child reaches high school.  The statistics on how the vast majority of teens go out into the world with no basic knowledge of how to handle money is staggering! We need more parents to get on the "money training" bandwagon, so our kids don't become one of those statistics.

See Responsible Teen Money Management for some tips on how to get your teen started on budgeting and money management.


YOUR TWO CENTS

What allowance requirements have you used? What worked well?
What didn’t?

We’d love to hear how you've helped your kids learn how to manage their money. Or how your parents taught you.



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see also Kids & Money

and Responsible Teen Money Management