I have always been against the idea of giving an allowance to kids. I mean the kind of allowance that kids just get, whether they’ve been helpful or awful, completed all their chores or none of them. I wanted my kids to earn money rather than give it to them. I wanted them to learn that money comes from doing productive work, not just from existing.
In search of the perfect system for helping kids learn the value of work, we’ve tried a few different things. They always involved the kids doing chores. A few systems included a specific task list for each child. In another, the kids could choose from a list of available prioritized chores, each of which had a value attached. In yet another, it was luck of the draw during a designated chore time.
None of these programs lasted very long. It wasn’t the kids fault. It was the parents. Before the kids were old enough to keep their own records, it was our failure to remember and track who had accomplished what. Then it was coming up with an appropriate chore for each age, and dealing with the inevitable differences in payment when one child’s work was better than another’s for the same chore. In a hundred ways, the relatively small role of assigning, verifying, and paying for work always seemed to turn into an ongoing job of mediation, arbitration, and record keeping. It was exhausting.
We knew we wanted our kids to learn how to work, and to learn how to make money choices, but our chores-to-cash systems were all failing. But we couldn’t just give our kids money, could we?
Nobody ever just gave us money when we were kids. Wouldn’t giving our kids money for “free” just spoil them?
Ironically, we found our answer in a book called The Opposite of Spoiled: Raising Kids who are Grounded, Generous, and Smart About Money by Ron Leiber.
It’s definitely worth checking out. It discusses much more than just allowance, but today I’m focusing on the allowance section as background on the allowance system that we’ve been using for over a year. Then I’ll get into the nitty gritty of when and how much.
The idea of tying chores to allowance
Kids have a growing list of things they want or need. As parents, we have a huge list of things to be done around the house. We naturally tie these two lists together by creating “chores” that we pay kids for, so that they can buy what they want.
A system like this has the potential to teach kids to work hard. It teaches them that money doesn’t grow on trees, but requires effort on their part.
Those are good lessons, of course, but a chores-for-money system isn’t the only way to teach them.
Let me start by saying that if you have a chore-earned allowance/wage/commission system and it’s working, keep it up! Well done!
For us it wasn’t working great. We tried lots of different systems. They took lots of time and oversight from mom and dad. We weren’t going to pay them a full wage for a job half-done. It was overwhelming for me to decide who earned what and to be fair. They were constantly begging for money chores but were picky about which ones they would do.
Then they’d use the system against me. Any time I asked someone to do something, they would inevitably ask, “How much is it worth?” No one wanted to do anything for free, when others jobs were paid.
They way it was going, if we kept up the chores-for-money model, the kids would have tried to pass up household chores altogether as soon as they started earning more money from babysitting or yard work for others.
Shouldn’t everyone happily help around the house just because they live there? After all, no one is paying me for loading the dishwasher, doing laundry, or making dinner, day after day (after day…). We want to instill in our kids habits of contributing at home because they’re a part of our family. We all contribute to help keep our house clean and our family running smoothly. If we need some “leverage” to teach that, we will use privileges instead of money.
But we definitely want our kids dealing with money.
Why we give allowance that isn’t tied to chores
Succeeding with money is a super important skill that kids need to learn at home. While kids can learn hard work from school or sports, real financial lessons are a little harder to come by.
In order to really learn and internalize money management lessons, you need some money.
Giving our kids money is like giving them the resources they need to learn any other topic. We give them books, sports equipment, and musical instruments so they can learn. It wouldn’t make sense to expect your child to learn tennis without a racket or guitar without a guitar.
So we give them money for the sole purpose of practicing with money.
We want them to feel the remorse of blowing all of their spending money at once, while the stakes are low and someone else is making sure there is food on the table.
They can experience a sense of accomplishment when they deny themselves instant gratification and save up for something special.
After exploring the concept of allowance from this perspective, we decided to make some changes.
We started giving our kids an allowance, not to teach them about work, but to let them practice with money.
We were excited. The kids were excited. And a year later we’re all still happy with how it’s going.
How Much Should You Pay for Allowance?
In The Opposite of Spoiled, the author recommends between 50 cents and $1.00 per year of the child’s age for a weekly allowance. For example, the weekly allowance for a 6-year-old would be between $3 and $6.
We chose the low end of 50 cents per year. For our family, it currently looks like this (though the 3-year-old is getting a raise really soon):
- 11-year-old: $5.50 per week*
- 9-year-old: $4.50 per week*
- 7-year-old: $3.50 per week*
- 4-year-old: $2.00 per week*
We also have an 18-month-old, but he doesn’t know that money is a tool or a resource. He still sees it as a snack. He will start getting an allowance when he is 2.
For our four kiddos who get an allowance, the total is $15 per week or roughly $60 per month. If you’ve seen our monthly budget you’ve seen this line item for the past year.
How We Teach Our Kids to Divide Their Allowance Money
Because the express purpose of giving an allowance is to provide our kids with “practice money” early and while the stakes are low, we give them guidelines about how to use it.
You wouldn’t throw a clarinet at your kid and wish them good luck. You would at the very least give them a book to guide them. Even better, you (or the school) would give them a human (or at least a YouTube video) to talk them through the basics.
The basic guidelines we give our kids about their money are:
1st: Give (10%)
We teach our kids to first pay 10% of their money for tithing. Giving away 10% of your income is a good, solid financial principle to follow whether you’re religious or not. Worthy causes abound. Teaching your kids to be generous and think outside of themselves goes beyond just teaching finances.
2nd: Save (45%)
We help our kids think of things to save their money for. At first they often don’t have any idea of what they want to save for, but with a few suggestions to get the ball rolling, they easily come up with a list. From there they decide on a specific goal to start with. Having a goal in mind focuses their efforts and lets them really enjoy the fulfillment that comes from achieving something exciting.
3rd: Spend (45%)
Half of what is left after tithing is for spending. When kids have money they are allowed to spend, they learn that their money can buy lots of things, but it can’t buy everything. When the money is gone, it’s gone, and they’ll have to wait to get more. They learn to be smart shoppers by looking at prices, finding the best deals, and weighing various options before making their final decisions.
Our kids have never questioned our requirements for dividing their allowance money. After all, it’s free money to them, so they have no room to complain.
As they earn money beyond their modest allowance, they continue the same division of funds. As they earn more “real money,” we will encourage them to save a larger portion of what they earn, for college and other larger goals, but for now we want them to save toward goals that will be attainable in a reasonable amount of time so they can know what it feels like to win with money.
Change Matters– The Nitty Gritty of Kid Allowances
I knew that the hardest part about allowance and teaching kids to manage their money would come in the logistics.
As adults who do most of our money management digitally, it’s pretty easy to divide our money however we please– down to the penny!
For a six-year-old who is given a $3 weekly allowance and taught to put 10% into giving and then split the remainder between spending and saving, it can be tricky when you just have three $1 bills to work with.
Don’t worry! I solved this issue before we even started.
I made a note card for each age. The front of the card shows:
- Total weekly allowance for that age
- How to break that dollar amount down into the three categories (Tithing- 10%, Savings- 45%, Spending- 45%)
On the back of the card I have a handy parent reference that shows the number of dollars, quarters, nickels, and dimes that will allow the child to have the right coins to easily divide the money between their categories.
*I didn’t want to deal with pennies, so when the kids have an odd age (meaning there is a $.50 in their payment amount), I changed it to be $.55 instead. Let me show you why in this example:
If a 9-year-old gets $4.50 per week and gives 10% for tithing ($.45), he is left with $4.05 to split between spending and saving. That will be $2.02 in one and $2.03 in the other, both involving pennies. Ugh.
On the other hand, if we pay our 9-year-old $4.55 per week and he puts $.45 into tithing, he is left with $4.10 to divide between saving and spending, which divides beautifully ($2.05 in savings, $2.05 in spending) without using any pennies. Hooray!
This works out the same in every odd year. The even years work out perfectly on their own.
Yes, I realize that a full 10% would actually be $.455, so they are a half penny short. In our own finances I always round up, but for the sake of sanity and simplicity, I’m avoiding pennies. Now that I think of it, I could add an extra penny for tithing on odd years (adding $.06 instead of $.05).
Whatever you do, be sure to talk with your kids about money
Whether you give your kids an allowance or pay them wages for chores, the most important thing is that you talk about money with your kids. They aren’t going to learn to manage money at school. Their friends aren’t going to give them solid advice. They need your help!
You don’t have to have a perfect track record with money in order to be a valuable teacher. Kids are smart. They can learn from our mistakes. Wouldn’t you rather that your kids know about your mistakes so they can avoid making similar ones. They’ll be forgiving and they’ll thank you later.
Need some ideas to get started? Here are 4 things you should tell your kids about YOUR finances.
The Opposite of Spoiled also has lots of great ideas for embracing, not avoiding, conversations about money with your kids. The author shares ideas for handling not just allowance, but chores, charity, savings, birthdays, holidays, cell phones, clothing, cars, part-time jobs, and college tuition.
Not every idea in the book fits our family, and not every idea will fit yours either. That’s fine. Thankfully, every family is different. But teaching kids to understand and wisely use money is a uniquely parental responsibility. They won’t learn it anywhere else. It’s definitely worth reading and really thinking about.
What do you think?
- Do you give your kids an allowance? Do you pay them for chores? Why or why not? How did you decide on the amount?