For some parents, there’s another question to consider first—and that’s whether they should give their child an allowance at all. To help with that question, Rocket Money provides pros and cons.
Starting with the cons, downsides include how an allowance could give your children the idea that contributing to the family by doing chores should always be rewarded. Plus, when one of your children doesn’t need the money, they may not be motivated to get their chores done. For families with a small budget, it may be challenging to give their children an allowance—and, for some children, having their own cash makes it easier to make poor choices when spending money.
That said, plenty of upsides exist for allowances. They help to teach children financial responsibility and the relationship between getting a job done and receiving money. Allowances can motivate children to get chores completed and give them money to buy non-essential items without needing to ask parents for the funds.
As context, here’s an overview of allowances given by parents today. According to T. Rowe Price’s 14th Annual Parents, Kids & Money Survey, 79 percent of parents give their children allowances. Most parents (59%) who do so consider allowances a way to teach children the importance of working to earn money, requiring their kids to earn their allowance in some way. Other parents—35% of respondents—see allowances as a way for their children to learn how to manage money. Other reasons parents give: to get their kids to stop asking them for money (three percent); because their children’s friends get one (two percent); and for other unnamed reasons (one percent).
The mean amount? $19.30 weekly with 35 percent of parents providing an allowance in the $11 to $20 range.
As far as when it’s the best time to start providing one, Scholastic provides a chart to help parents decide what allowance to give children at each stage of life. In general, they say, children are ready to receive an allowance at the age of five or six; but, if they don’t seem ready, then don’t force the issue.
Scholastic recommends not tying the allowance to grades, chores, or behavior. Children should seek good grades because of a desire to learn—and do chores simply because they’re a member of the family.
As far as how much, the article recommends fifty cents to a dollar per year of age each week. So, with this formula, a ten-year-old would receive $5 to $10 weekly. This is a good time to discuss budgeting and savings with your children.
Once your child becomes a teenager, given they demonstrate appropriate maturity, provide the allowance through a prepaid debit card. This allows them to manage the money online, an important skill. Use this as an opportunity to discuss credit with your teen, sharing how buying things on credit can cost extra money because of interest if the bill isn’t paid promptly in full.
Hopefully this information will provide you with enough insights to make informed decisions! Each family and each situation are unique.