Allowances are always a hot topic among parents. Some parents are for them while others are not. I am all for children earning money but I’m not a fan of allowances that function as essentially entitlement programs. When people ask me what my thoughts are on allowance, my initial response is always, “What are you paying them for?”
Too often parents give money without it being earned or on demand. This is a bad habit for both parents and kids. While it may make sense to occasionally give your child money upon request, it’s another thing to hand them cash every time they ask.
The American Institute of CPAs surveyed parents on allowance and put together this great infographic. I found the results fascinating and a bit surprising.
81% of Parents Said They Discuss Money Management with Their Kids.
At first blush, this makes me happy, but it also seems high to me. I am curious as to how they defined money management. Is it telling your kids not to spend all your money at once? Or do 81% of parents sit down with their kids and truly talk to them about how to make good decisions with their allowance?
The average yearly allowance totals $780 a year or $15 a week.
This is a generous allowance and I have no problem with this amount if:
A) Parents can afford and budget for it. For 2 kids, that’s $1,560 a year.
B) The kids have earned that $15 and it’s just not given.
Allowance can be a great way for kids to gain hands-on money experience, but it does them little good if you give more than you can afford and they do nothing to earn it.
Teach Kids Money is Earned, Not Given
We set clear expectations with Lauren and Taylor on what it means to be a good citizen in our home. They know that they need to keep their bedroom clean, make their bed, bring dirty dishes to the sink and so forth. We do not pay them for doing those tasks.
Because I do believe that children need to have the opportunity to earn money, I post a Weekly Job List. The girls can choose which jobs to accept and control how much they earn. They immediately allocate their earnings to their save, spend and share goals.
Tip: Make sure kids understand that money needs a purpose. We give our money purpose through our save, spend and share goals.
Do You Know How Much Your Children Earn?
I suspect most parents haven’t added up how much they give their kids in allowance on an annual basis. The weekly amount seems reasonable and parents let their kids spend it as they please. Of course, when you see the yearly total, you may wonder why your kids can’t buy the new iPhone 6 or the designer jeans they want themselves.
While I believe kids should absolutely have a say in how their money is used, we, as parents, also need to guide them as to how to use that money wisely. My guess is most kids (and parents) don’t know how their allowance was spent. And mindless spending is a bad habit to form at any age. An allowance can be a great way to help your child form good money habits and beliefs, but that only happens if you help them.
Tip: Teach kids to budget their allowance. Help your kids (especially older kids) look at their allowance from a weekly, monthly and yearly perspective because $15 looks different than $780. How do they want to use their money? If they want something big, like a new iPhone, they may think it’s impossible because they haven’t looked at the big picture. Help them figure out what their priorities are and how to balance their budget.
What surprised you the most? Do you give your kids allowance?
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