7 Key Reasons Your Should Give Your Kids an Allowance

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To give an allowance or not? This is the question that every parent has to decide for their family. 

I’m here to tell you that giving your kids an allowance could be one of the greatest lessons that they receive while living at home. Instead of their first experience dealing with money regularly being their first paycheck as a teen or young adult, with an allowance they start learning money stewardship as children. 

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I don’t just want to share the 7 benefits of an allowance for kids but I also want to share the four mistakes you can avoid when giving an allowance to your kids. 

1- Allowances teach your kids to make decisions with money

Allowances give your children the opportunity to start making decisions about their money. Should they save their money and buy a bicycle or should they indulge in buying ice cream when the ice cream man comes around? 

For many children, an allowance is their first opportunity to have a say in how money is spent. It can be an eye-opening experience when children realize how much money something costs. 

[Read more about the top 9 things I want my kids to learn about money]

Not every decision they’ll make will be a good one (my kids love the ice cream man), but making those mistakes when it’s a $10 toy is a lot better than making them when it’s a $20,000 car. 

2- Allowances help your child understand the value of money

Most parents probably recall when they were kids and how they had no idea what things cost. You would ask your parents for something and you either get it or you didn’t get it. Money didn’t come into the equation until the child was older unless they got an allowance. 

Not only do children start paying attention to the price of things but they also start equating how much work it took to pay the price for the item. 

Instead of a toy being $20 it’s now 3 weeks of saving their allowance, 21 days of unloading dishes, or cleaning up after the dog. That $20 isn’t just green paper that they traded for something. 

In this study from the University of North Georgia, researcher, Eavan Thomas, found that students who had earned an allowance in childhood by doing chores were more financially capable than children who were given an unearned allowance. 

3- You can teach kids budgeting

Letting your children earn an allowance is an excellent opportunity to teach them about budgeting. 

You and your kids can talk about and learn about what a budget is and how they can budget their money so that they can get the maximum benefit from their allowance. 

Part of their budget plan should be setting a goal, like purchasing a video game that they want or paying (at least partially) for some lessons that they want to take.

After they set a goal they can decide how much money to save towards that goal every time they earn their allowance. In this budget, they can also have an amount for tithing for charity, spending money and money that they’re saving towards their goal.

[This printable Money Manager for Kids will help your kids keep track of their giving, saving, and spending money!]

You could even include them when you are making the budget for the family and how it works in the adult world. 

4- They will have their own money to spend when they want something

How many times have you heard “Mom I really, really, really want this” in just the last month?

 Is that number more than you can count? Yeah me too. A good determinant on whether they actually really, really, really want that thing is if they’re willing to spend their own money on it. 

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 Most of the time, when they learn they have to spend their own money on it all of a sudden they don’t want it nearly as much.

It makes him take a good hard look if their wants are more than just whims. This can help them as adults not make as many impulse purchases.

5- Teaching them self discipline

Along the same lines, having an earned allowance teaches self-discipline in two areas.

First, they have to have the self-discipline to do the chores to earn the allowance. Having an earned allowance means that if they don’t work they don’t get paid. 

Then they have to learn self-discipline to not spending all their money on the first thing that catches their eye. Be warned this will take some time to learn. 

It’s likely their first few allowances they’re going to spend it immediately and maybe on some things that they’re going to regret. And that’s kind of the point. You want them to make these money mistakes when the stakes are small, like spending all their money on a toy that’s a complete disappointment. 

Gently remind them once they spent all their money that they won’t get any more money until they get paid the next allowance. 

This is the hardest part for parents because it’s a hard lesson for kids to learn. Just stick with it and after a few cycles of this, They will be open to suggestions about budgeting their money and making smarter decisions with their money. 

6- Help your child create a saving habit

In this 2019 study, 69% of Americans had less than $1,000 in savings. 

There’s a lot of factors that go into the reasons why Americans have less than $1,000 in savings, but not having a savings habit is one of those reasons. 

Giving your child an allowance and getting them in the habit of saving as little as 5% of it can help them create a lifelong savings habit.

Look at your local credit unions and banks to see if they have a junior saving account or student saving account. Many do offer this with no fees and typically a very small minimum amount to open the account. 

It might seem silly or inconvenient, but every time your child gets paid their allowance take them to the bank to physically put the money in their savings account. 

Use a tracker to help them visualize their savings growing. 

7- Use extra chores as a way to earn extra money

Another way to allow your child to earn some extra money is a “jobs for hire” board. That simply means extra chores for extra money. 

The major thing you should be careful of here is valuing jobs that your boys typically choose to be more valuable than jobs your daughters typically choose. As a society, we tend to value jobs males perform higher than jobs females typically perform. 

[The BEST chore system you should be using with your kids!]

Some extra chores could be watering house plants, washing out trash cans, cleaning out the car, washing the car, mowing the lawn, deep cleaning the kitchen or bathroom, and helping clean out the garage. 

Allowance mistakes

Any time we try something new as parents, it is almost guaranteed we are going to get some things wrong and make some mistakes. I wanted to give you a head start to avoid some common mistakes parents make with giving allowances so that you can avoid them. 

1- Giving your kids an allowance even when they didn’t do the work

This is definitely the biggest mistake parents make when giving their children an allowance. 

From the University of North Georgia survey, we can see young adults who were given an allowance but were not made to earn it faired far worse at handling money by the time they entered college. 

2- All Their Chores are Connected to their Allowance

Part of being a person an adult and a housemate is caring for and cleaning the house. Being a helpful member of the family who helps around the house should be expected not something they’re paid for. 

A basic set of chores that everyone in the family has to do should not be paid for. Things like making a bad, clearing the table, cleaning up their own toys should not be paid for. 

Paying for ways they go above and beyond their expected chores is a better way to give an allowance. Also paying for more in-depth chores like doing the dishes or vacuuming the downstairs or cleaning the bathroom is another great way to give an allowance. 

3- Worry about how much to give them

I spent a lot of time worrying about if I was giving them enough allowance or not enough allowance or if I should pay them based on how difficult their jobs were or on their age. 

But it doesn’t matter how much money you’re giving them. The important thing is that they are getting to practice making money choices and learning good money habits. 

Do not let this trip you up. Pick an amount it works well in your own budget and go from there. 

4- Not starting soon enough

You should start giving your kids an allowance when they can count money (around kindergarten). This makes managing money and making money choices a basic part of their life because they started so young. 

The earlier you can start conversations on important topics like money, the longer you have to teach your child about it.

The Take-Away

Letting your children earn an allowance can be beneficial in helping them to learn money management skills, make low-risk money mistakes, and create healthy money habits that will help them to develop financial literacy. 

Your child can learn budgeting self-discipline creep savings habit learn how to talk about money and understand the value of money all before they make their first paycheck. So that when they cash that first paycheck they’re making good financial decisions.

I would love to hear from you in the comments: how do you handle allowances in your home? Any tried and true tricks for other moms?

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