The Art of Setting Age-Appropriate Allowances: A Parent's Guide to Raise Money-Savvy Kids

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Figuring out how to provide allowances for kids and determining the appropriate amount has become a challenging dilemma for many parents.

When I was a child, I used to receive a monthly allowance of two dollars. At that time, those two dollars could get me three packs of juice with soft packaging or two cups of apple juice from the vending machine. However, times have changed, and nowadays, two dollars just doesn’t suffice.

Mintlife, a subsidiary of Intuit, recently conducted a survey of 1,000 Americans to gain insight into parental perspectives on providing allowances to their children. The survey aimed to uncover how parents determine the amount of allowance, whether it should be given unconditionally like their love, or be based on behavior.

Approaches to Children’s Allowance

The survey revealed that an impressive 78% of the parents surveyed either already provide or plan to give their children an allowance. The motivations behind giving children allowances varied among families, but the primary reasons cited by most parents were as follows.

Instilling the Value of Earning Money: A significant 59% of parents see giving allowances as a crucial means to impart the lesson that money is earned through work.
Teaching Financial Management: Approximately 35% of parents use allowances as a tool to teach their children how to effectively manage money, instilling vital financial skills.
Reducing Dependency on Parental Funds: A smaller group, at 3%, hope that providing an allowance will diminish their children’s frequent requests for money.
Peer Influence: A mere 2% of parents admitted that they offer allowances because their children’s friends receive them.
Miscellaneous Reasons: About 1% of parents cited other motivations for providing allowances.

Key Factors in Determining Amounts

More than half of parents believe that children should earn their allowance through completing chores. The primary considerations when determining how much allowance a child should receive include:

Chores: A significant 52% of parents think that the completion of chores should be the basis for earning an allowance.
Behavior: 43% of parents take into account their child’s behavior as a factor in allowance allocation.
Age: Approximately 38% of parents consider their child’s age as a relevant determinant.
Grades: About 35% of parents consider their child’s academic performance when deciding the allowance amount.
Parents’ Income: A smaller portion, 19%, factor in their own income when determining the allowance.
Parents’ Childhood Allowance: A mere 7% of parents look back at their own experiences with allowances as a reference.

While most parents view allowances as an essential tool for teaching financial skills, a notable 13%, or nearly 1 in 7 individuals, hold the belief that children should not receive an allowance. Opponents argue that providing children with unrestricted spending money can foster poor financial habits.

Providing Age-Appropriate Allowances

When asked about the appropriate age to commence giving children an allowance, most parents indicated that the most popular age ranges were 7-9 years old and 10-12 years old. Notably, the majority of parents favored starting at 10-12 years old as the ideal age to introduce allowances.

According to data collected by Greenlight, an educational financial app designed for parents, in 2023, the average weekly allowance for 5-year-old children is $6.04; for 13-year-olds, it’s $13.01, and for 17-year-olds, it’s $23.69.

Average Weekly Allowance for Kids at Different Ages

Age	Weekly Allowance
5 years old	$6.05
6 years old	$6.69
7 years old	$7.11
8 years old	$7.73
9 years old	$8.37
10 years old	$9.27
11 years old	$10.32
12 years old	$11.64
13 years old	$13.01
14 years old	$14.96
15 years old	$17.09
16 years old	$20.54
17 years old	$23.69
18 years old	$29.69
19 years old	$34.57

[download-image id=allowance-group]

Scholastic’s child education experts offer guidance on giving allowances tailored to various age groups.

Scholastic is the world’s largest publisher of children’s books and educational materials, serving K-12 grade students.

Financial Awareness: Ages 5 or 6

Around the ages of 4 or 5, you can begin introducing children to the concept of money.

Engage them by involving them in activities like clipping coupons at the supermarket (kids generally enjoy cutting things). While shopping, hand them the coupons and encourage them to pay attention to the products they relate to.

This simple, interactive approach fosters a sense of participation and provides an enjoyable way to discuss spending and saving.

When you sense that your child is ready, you can gradually introduce the idea of an allowance. Keep in mind that the appropriate age for this can vary from child to child, so avoid pushing the issue if they are not clearly ready.

Money Awareness: Ages 7 and Up

Between the ages of 6 and 8, children typically begin grasping the basics of how money functions. During this period, consider giving them their allowance in the form of coins. This presents an opportunity to teach them about coin values, the history of currency, and the evolution of American money.

It’s worth noting that some experts advise against tying allowance to chores, behavior, or grades. Doing so can transform it into a tool of reward or punishment rather than an educational instrument.

Children should be encouraged to learn for the sake of knowledge and contribute to household chores as responsible family members. Tasks like keeping their rooms tidy and assisting with chores such as dishes and laundry are responsibilities they should fulfill as part of the family, rather than just to earn extra money.

However, it is acceptable for children to earn extra money through additional tasks, such as undertaking special cleaning projects like the attic or garage, beyond their regular responsibilities. This is akin to teenagers taking summer jobs to earn extra income.

Raises: Ages 10 or 11

As children reach the ages of 10 or 11, it’s natural to consider giving them raises in their allowance. But how much is appropriate? Various child education experts offer different recommendations. Some suggest providing 50 cents to 1 dollar per week for each year of age, while others lean toward 1 to 2 dollars per year of age.

The consensus tends to settle at around 1 dollar per week per year of age. For instance, a 10-year-old child might receive approximately 10 dollars per week as an allowance, although this figure can vary based on the local cost of living and the family’s financial circumstances.

As your child continues to grow, it’s essential to gradually increase their responsibility for discretionary spending. One effective approach is to monitor your spending on your child for a few weeks and then select one or two non-essential items, like snacks, comic books, baseball cards, or iTunes downloads, to no longer cover financially. This encourages them to make thoughtful choices about their discretionary expenses.

When providing an allowance, it’s important to offer your child enough money to not only meet their needs but also to help them learn how to budget and make their own choices.

However, it’s equally vital not to bail them out if they overspend. Resisting the urge to provide extra money when they run out reinforces the lessons of responsible money management. Offering a safety net would undermine your efforts and diminish their motivation to learn financial responsibility.

In addition to discussing spending, it’s crucial to have conversations about savings and budgeting. You want your child to understand that the money they receive is not unconditional.

A survey by the JumpStart Coalition for Financial Literacy among high school students revealed that only around 40% had savings accounts. Therefore, it’s essential for your child to grasp the bigger picture of money management, including the significance of saving. These discussions help instill a well-rounded understanding of financial responsibility in your child.

Introduce Money Management Tools: Ages 13 and up

Banks typically require children to be at least 13 years old to open a child checking account. Given the tech-savviness of most kids today, it’s worth considering the option of opening a child checking account linked to a debit card. This allows your child to have more control and responsibility over their finances.

Chase First Banking Child Debit Card

To promote financial education, numerous banks offer child checking accounts that don’t impose monthly fees but do require parents as co-signers. Parents can deposit their child’s allowance into this account weekly, providing kids with the opportunity to withdraw cash from ATMs, shop online, check their balance, and more.

For instance, Greenlight offers a checking account with no minimum age requirement, and children can use the attached debit card wherever Mastercard is accepted. However, it does come with a $5 monthly fee, similar to a “monthly fee.”

Parents should seek suitable moments to discuss financial matters, such as when the monthly credit card bill arrives. This provides an opportunity to explain that failing to pay the bill promptly can result in the accumulation of interest, which may impact credit scores. Such discussions contribute to your child’s financial awareness and understanding of responsible money management.

How to Establish an Allowance System

Set Clear Expectations

When you decide to start giving your child an allowance, sit down and talk to them first.

If you plan to link chores and allowance, make it clear which chores or behaviors are required to receive an allowance. Also, let them know that you will provide food and clothing for the household, but you won’t pay for non-essential toys or games. If you don’t intend to tie chores to allowance, make that clear to your child as well.

Personal Experience: I’ve personally experimented with the approach of entirely linking chores and allowance, but I found it to be less effective because it didn’t fully align with my beliefs. My current approach is to convey to my child:

We function as a family, working together as a team. We hope that you can contribute by completing some chores because you are a valued part of our team.
Having money to buy things you desire when you encounter them in a store is a valuable skill. You can also earn extra money by taking on additional chores to purchase items you want.
As you grow up, you’ll need to manage various responsibilities to run your own household, and this is an opportunity for you to acquire these valuable skills.

It’s important to note that every family is unique, and you can choose the approach that aligns best with your family’s values. However, it’s crucial that parental expectations for the allowance system and the child’s understanding of allowance are in harmony. Clear communication is key.

Create a Budget Together

Sit down with your child and work on creating a weekly or monthly budget. Teaching children the fundamentals of budgeting early on will help them understand where their money goes and foster responsible spending habits, preventing them from spending it all as soon as they receive it.

For younger children, you can start by teaching them to differentiate between “needs” and “wants,” enabling them to use their allowance more thoughtfully.
For teenagers, consider helping them craft a more comprehensive budgeting strategy, set financial goals, and learn how to increase their savings.

Promote Saving

Emphasize the importance of saving by encouraging your child to set a savings goal for something they desire. Assist them in calculating how much they need to set aside each week and determine how long it will take to achieve their goal.

Another effective step is to open a savings account for your child. Typically, this involves a parent being the primary account holder, either through a joint account or a custodial account, or contributing to a 529 education savings plan.

There is no minimum age requirement for these options, and the earlier you start saving, the more substantial the benefits. Regardless of the method chosen, actively involving your child and cultivating their interest in saving is highly beneficial.

Use the “Spend, Save, Give” Chart

Teach your child how to allocate their allowance judiciously by introducing them to the “Spend, Save, Give” method. This entails dividing their allowance into three parts:

Spend: An allowance portion dedicated to purchasing items they want.
Save: A portion set aside for saving toward future goals.
Give: Another portion allocated for charitable donations to organizations that help others.

This approach not only imparts valuable money management skills but also instills the habit of giving back to the community and helping those in need.

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3 references

[1]. Mintlife. Survey: Over 50% of Parents Opt for Chore-Driven Allowance for Kids

[2]. GreenLight. Average allowance by age for kids and teens

[3]. Scholastic. Allowance, Age by Age

Fan Zhao

A smart and thrifty homemaker who loves baking.

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