Hands-On Money Management: Allowing for Allowances

Helping your child to have the right attitude toward money is important for parents to teach. But at some point—usually when their kids are learning about money in school—many parents wonder if they need to go beyond this foundation and actually give their child an allowance.

While many people have come to think of an allowance as a given or a rite of passage for childhood, it’s interesting to note that a 2006 survey by the research firm Yankelovich found that fewer than 60 percent of children aged 6 to 17 received an allowance!

The reasons for not giving an allowance can vary. Some parents might not give an allowance simply because family finances are too tight to spare the extra dollars. Others feel like an allowance leads to frivolous spending or a failure to see the connection between work and money.

Using money to teach

Whether you choose to use an allowance or have your child earn money by doing chores around the house or by getting a job babysitting or mowing lawns, giving your child the opportunity to use and make decisions about money is a good, hands-on teaching tool.

With the help of an involved parent, the opportunity to have some money of his or her own can teach a child:

• How to budget on a small-scale.
• Keys to being a smart shopper.
• That money is a limited resource and needs to be used carefully and responsibly.
• How to set goals and prioritize.
• The benefits of delaying gratification.
• The consequences of financial mismanagement on a small scale.
• Decision making (with boundaries and limits that gradually expand as your child gets older and shows himself ready).
• The importance of long-term savings (such as for a car or college).
• The biblical principles of tithing and giving back to God.

Different styles and approaches

There’s no “one size fits all” method when it comes to providing children the opportunity to have money. In fact, there are probably as many approaches as there are parents!

Here’s a sampling of different basic systems:

• Children receive a set allowance that is not tied to chores, but is simply a “benefit” of being part of the family. However, there are also family obligations, such as keeping one’s room clean and helping with other routine tasks around the house. Additional money can be earned by doing extra jobs.
• Children have certain chores that are required. If they would like to earn money, they can choose from a list of optional chores that have a set payment.
• Children receive a set allowance that isn’t tied to chores. However, if chores do not get done, the responsible child will have to pay another family member to do them.
• Children take responsibility for a certain amount of money that would regularly be spent on their expenses—for example, school lunches, clothing or entertainment.

Your system may be a combination of different approaches and be what works for your family. And it can change as your child gets older and grows in responsibility. What’s important is that it be age-appropriate; that it be simple enough for both you and your child to understand, manage and keep track of; and that it be clear what types of purchases your child will be responsible for.

Additional tips

Here are just a few tips to make whatever system you use work well:

• Allow your children to experience the consequence of financial mismanagement. Don’t bail them out if they’ve wasted their money. (It’s a lot easier to learn this lesson when you’re 8 than when you’re 28!)
• Include stipulations that encourage savings and teach budgeting principles. My daughter’s sixth-grade teacher told her class how her father required she save a certain percentage of her babysitting money. He matched it dollar for dollar, invested it and, years later, presented it to her and her husband as a hefty addition to their down payment when they were ready to purchase their first house!
• Encourage wise shopping. Raising Money Smart Kids suggests making your teen pass a “shoppers ed.” course of your creation before granting a clothing allowance (Janet Bodnar, 2005, pp. 119-120). And, of course, even when young people have a clothing allowance, you can still provide the guidelines and retain veto power.
• Think twice about paying for good grades or good behavior. It’s better to let these things be their own reward. (And, of course, parents can always offer hugs, words of appreciation, celebration dinners and the like!)
• Use God and His Word for time-tested guidance on financial matters. Encourage your child to see God as his or her Financial Partner—the One who can bless all of our endeavors, including those dealing with money.