Money-Savvy Kids: 9 Pros and Cons of Giving An Allowance to Children
Money-Savvy Kids: 9 Pros and Cons of Giving An Allowance to Children
15 cents. A dime and a nickel.
Three little piles of these two coins are what my brother, sister, and I found on Dad’s dresser every Sunday morning. The dime was to be put in our piggy banks, and the nickel was to be put in the church offering plate.
Allowances are heftier now than when Dad was doling out our weekly pay in the 1960s, but one thing hasn’t changed. Some parents are all-in when it comes to paying allowances, and others don’t agree at all. Who is right?
The Pros of Paying Kids an Allowance
Money Smarts
Giving your kids an allowance can be a fantastic way to teach them about handling money responsibly at an early age. They’ll learn the ABCs of budgeting, saving for treats, and how to make wise spending choices. These money skills will be worth gold as they grow up.
Little Money Managers
With a regular allowance, kids get a taste of what it’s like to have their own money and feel grown-up and independent. This sense of responsibility can make them more accountable for their actions, especially if you tie it to chores or tasks they help with around the house.
Super Savvy Savers
An allowance gives them a chance to set aside cash for rainy days or something special they’ve been eyeing. Learning delayed gratification as they patiently save for an epic toy will help them immensely in the future.
Real-Life Practice
You can give your kiddos a chance to experience real-life financial situations. They’ll get to make their own purchases and learn the ins and outs of being a smart consumer. They may purchase something that is low-quality and find it doesn’t last. Even mistakes are great teachers!
The Cons of Paying Kids an Allowance
Entitlement Alert!
Some worry that an allowance might make their kids think they’re entitled to money for everything they do.
Say Goodbye to Chores from the Heart
Some parents fear that paying for chores might zap away the joy of kids helping around the house just because they want to. We want our helpers to feel proud and connected, not like they’re doing everything for cash.
Money Mis-managers
Some kids are great at saving while others are not. Without guidance, they could end up spending like crazy without understanding the importance of saving for the future.
Sibling Showdowns
What if one child is a couple years older than another child and able to do more and better work than the younger child? Do you pay the older child more? Do you pay them the same amount? You don’t want to fuel sibling rivalry, but you want to be fair.
Money Crunch
Some days, money might be tight for Mom and Dad, and giving regular allowances could be tough.
The Answer (according to Margaret)
Full disclosure: I asked ChatGPT to provide the pros and cons you read above. But here’s how I actually advise my clients who want their kids to help around the house and wonder if they should pay an allowance . . . Whether you do or do not pay your children an allowance isn’t the most important thing to focus on. More important is:
Teach your children solid money management skills before your kids leave home. You can pay an allowance OR provide money not linked to doing chores. Either way, make sure your children have an age-appropriate amount of money that is all theirs. Teach them about spending (short-term money), saving (long-term money), and giving (as an act of gratitude for all that we’ve been given).
It’s fine to pay for chores but children also need to know that they’re expected to cheerfully help around the house without pay because it’s one of the ways a family serves each other. Helping at home isn’t optional; it’s a privilege.
Provide consistency when it comes to paying your child. If a child only receives money on a hit-or-miss basis, they won’t learn to manage it well. Establish a system of giving your children money that you can afford, have on hand (often the most challenging part!), and is a healthy amount (not excessive) for your child’s age.
All rewards don’t have to be monetary. Mom might take Billy out for an ice cream cone to thank him for helping clean the house, and Billy should be just as happy with that as cash.
Expect excellence when it comes to chores. Excellence doesn’t mean perfection, but it does mean the child performs the task to the best of his reasonable ability. Accepting less than excellence teaches a bad work ethic and is hard to correct later.
Pay your child more than 15 cents. It’s 2023, for goodness sake!!
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