Allowance has become a hotly debated subject among parents over the past few years. Parents argue if kids should even have an allowance (The answer is YES! See my post “Why Every Child Should Have An Allowance”) and if so, how should the allowance be set up?
While I’m glad this is being talked about – let me put your parenting worries at ease: There is no confirmed right or wrong way to give an allowance. I totally get why this is a source of stress…because we’re parents, and worrying that we will mess up our kids is what we do best! We are passionate about our kids and want to make sure we are doing what’s best for them. And let’s be honest…every parent is terrified that they are going to make that ONE mistake that will wreck our children for life!
When it comes to allowance, if we pay our child to do chores, will they turn into entitled beasts? If we pay kids an allowance that’s not tied to chores, will they become even more entitled by thinking they get money for free? What is a parent to do?
First, don’t beat yourself up on this one. There are a few ways you can set up an allowance, and which you choose depends on the child, on the family’s financials, and on your personal beliefs. As long as you aren’t forcing 40 hour work weeks on your child, or paying six figure allowances…you’re probably not causing irreparable harm.
Personally, I think this is a really important conversation, and am happy it’s become a focus of interest and debate. Allowance is one of the most impactful ways to teach children about money. It’s also the first exposure most of our children have to earning money, and can shape their attitudes around finance.
The below comparison is from my upcoming book, Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids about Finance. There are two general schools of thought on allowance structure, both supported by financial professionals.
- Chore-based allowance: It’s simple, your child does chores, they get paid. Not doing chores means no mula. There are several positives to this approach. Your child learns early that they need to work to make money. It helps them make choices and learn consequences. For example, if they choose not to do the dishes, they don’t get the money needed to buy a new toy. However, there are a few negatives. It teaches children that they don’t have to do chores; that chores are a choice. It can be seen as rewarded your child for doing things they should be doing anyway: making their beds, putting away their dishes and cleaning up after themselves. This then leads to the question of deciding what do you pay them for? Do you pay them for putting their dirty socks in the laundry? What about helping dad rake the leaves? How will you answer when they say, “I’ll only do it if you pay me”? Or, what if your child decides that they don’t need money this week, so they refuse to do any chores? While the chore-based allowance has obvious value, there’s a lot of gray area that is not addressed and it’s not always realistic for the real world.
- Pure allowance. Children get an allowance each week, no matter what. Separately, they are expected to do their chores and help around the house because they are part of the family. There is no link to allowance and work. What works well in this scenario is that no matter what, your child will have money. This is important, because your child will be able gain first hand experience with real money. Another benefit is they learn that chores are something they are expected to do because they are part of the family and it’s their responsibility…not because they will get paid! Critics of this approach believe that you could be in danger of raising entitled children who believe that money will just be handed to them, and they won’t learn the value of hard work.
The hybrid approach to allowance:
If you are like most parents and not sure which to choose, there is a third option. A hybrid approach provides the best of both worlds. Give your child a set amount of money each week as allowance. This should not be tied to any chore or job. Make it clear to them that as part of the family, they are expected to do certain daily chores like make their bed, put up their dishes, and clean up their toys. Tell your child if they want to earn additional money, they can do other jobs around the house. These should be different from the daily chores they are expected to do. Examples are washing windows, giving the dog a bath, washing your car or raking the leaves.
The hybrid approach gives parents a real world, enforceable way to give their children allowance. It removes the gray areas, sets clear expectations and gives their child real money to learn from. When you are ready to start an allowance program with your child, be as clear as possible. “Josh, because you are getting older and and there are things that you want to buy, I’m going to start giving you an allowance. That means each week we will give you $6. If you want to earn more money, we can find extra jobs around the house.”
Just keep in mind when your parenting anxiety kicks in (which it ALWAYS does!), the primary goal of an allowance should be to give your child money so they can practice how to manage it when they are young. If they are learning about money from their allowance – you are doing great 🙂
