Allowances for Children

"This is not fair! I need more money!” These words were spoken to me this past summer during a money management camp hosted for teenagers in Ocala, FL. The young lady was in the middle of a spending and budgeting simulation when she realized that she did not have enough income to pay for the high end clothing, red sports car, and 5 bedroom house that she wanted. As I watched these teenagers become frustrated with finances, it occurred to me that, in many cases, parents are waiting until their children are 16, 17, 18 years or older to start teaching them about money management. But how is an 18 year old who has always had Mom and Dad pay for everything going to know what to do when the National Bank of Dad closes and he has to go out into the real world and make ends meet?

According to Janet Bodnar, author of “Dollars & Sense for Kids,” children should begin learning how to manage money through an allowance as soon as they are old enough to recognize money’s worth. Linda Barbanel supports the same principle in her book “Piggy Bank to Credit Card,” indicating that as soon as a child is old enough to ask for something in the grocery store, it is probably time to get them started on an allowance. Many parents, however, are concerned by how much they should pay as an allowance, how often they should give an allowance, whether or not they should link chores to allowance, and how to get their children to save the money that they receive. All of these are valid concerns and there are many different approaches and theories out there, but most researchers agree on some certain principles.

First, let’s address the age at which children should begin receiving an allowance. As mentioned before, it is good to get children managing their own money as early as possible. If children have not already begun receiving an allowance by 6 years old, this is a good age to begin. It is at this time, around first grade, that children begin learning about money in school, and they are excited to apply what they learn. For instance, a 6 year old who receives a dollar a week can realize that that dollar is equal to 100 pennies, or 10 dimes, or 4 quarters, or 20 nickels; and he will be proud to share this information with his parents. Most children are going to get the money out of their parents anyway, adds Bodnar, so it is better to teach them to manage their own money than to allow them to nickel and dime you for every little thing they want.

Now that the age issue is out of the way, many parents just don’t know how much money is appropriate to give as an allowance. First of all, parents and children need to sit down and discuss what expenses the allowance will cover. For a 6 year old, one or two dollars a week will probably suffice to pay for the candy that they want at the grocery store, while an 11 year old may require a higher allowance in order to pay for movie tickets and arcade games. Basic living expenses such as food, clothing, and school supplies should be the responsibility of the parent, but even a 15 year old can be reasonably expected to contribute for special clothing items, events, and out-of-town trips, thus requiring a higher allowance. According to a Nickelodeon/ Yankelovich Youth Monitor survey, the average allowance for a 6-8 year old is $4.80 per week, a 9-11 year old is $7.00 per week, and a 12-17 year old is $16.60 a week. As this study shows, it is very reasonable to raise a child’s allowance as he or she gets older. Financial Advisor David McCurrach says that a good way to decide how much a child should receive as an allowance is to estimate how much you are currently spending to fulfill their requests and then set that amount as their allowance.