Children and Allowances
By Eileen Gallo, Ph.D. and Jon Gallo, J.D.
If there is any subject that is a hot button topic for parents, it’s allowances. We’ve seen parents almost come to blows during our presentations when the topic turns to whether we should give our kids an allowance and, if we do, when should we start and how much should we give them?
Here are some thoughts and recommendations on allowances:
- All children should receive an allowance. If you don’t believe in allowances, you probably aren’t going to emotionally or financially damage your child, but you are going to miss out on a wonderful way to start teaching your children the basics of financial management.
- Start when your child becomes interested in money. Usually, that’s about first grade. But a younger child (maybe four years old) with an older sibling in first grade may be ready for an allowance.
- The amount of your child’s allowance depends on a number of factors, the most
- important of which are your values, what’s included in the allowance and the age of your child.
Don’t settle for mechanical formulas, like an allowance equal to their age, so a six-year-old would get $6 a week. The best approach is to figure out in advance what you expect the allowance to cover and then sit down and discuss the matter openly with your kids. Let’s say that when the kids go to the market with you, you’ve established a family rule that each child can get one treat for himself. Or maybe you have a family ritual of going down to the local yogurt shop after dinner every Wednesday evening for a family treat. Do those treats now get paid for out of the allowance or are you still paying for them? Obviously, the answer is going to effect the amount of your child’s allowance. The key to setting the amount is to find that happy medium where the amount is not so low as to be unreasonable but not so high that your child doesn’t have to make choices about how to spend his money. In some families, children receive such large allowances that they rarely if ever have to make tough decisions about purchases or save for weeks or months to make a special purchase.
- As your kids get older, allowances should cover more items. By the time your kids are 12 (or even younger), you can include a separate clothing allowance. Giving your kids a fixed but reasonable amount to spend on clothing provides them with an another opportunity to make choices. A variation on the clothing allowance theme is to set a dollar limit on the amount you are willing to pay for certain items and let the kids use their regular allowance if they want something more expensive. You can put a dollar limit on specific items, such as $50 for shoes. If your children want a more expensive pair, they can pay the difference out of their allowance. Other items covered by an allowance as your kids get older can include movies, renting video tapes, buying CDs and presents for friends and putting money aside for charity.
- At the start, the allowance should cover no more than a week. As your child approaches adolescence, it might cover two weeks or even a month. By increasing the intervals, you are helping your child learn to budget for longer periods. By the time your child is in high school, an allowance should cover a full month. In college, it should probably be based on a full academic quarter or semester.
- Although we can’t tell you exactly how much to give your children, we can confidently make one prediction: Kids tend to run out of money before they run out of week. Expect it. It’s the start of learning how to budget. Be understanding and sympathetic. Help them think about how next week they can make the allowance last longer. But don’t rescue. It may be difficult not to give your child money if she cannot go to the movie with her friends because of poor budgeting. Resist your impulse to do so, however, because she will learn a tremendous lesson from her mistake. Rescuing sends the worst money message possible: You don’t have to be responsible with your money; there’s always more money for you.
- Keep allowances separate from chores. Children should think of chores as part of their responsibilities as members of the family, not as something they are paid to do.
- Provide your kids with an option for earning extra money by doing special chores. Giving them options to earn money based on additional work above and beyond the call of duty is a terrific learning tool. It mirrors the real world where people who do extra usually get paid extra or receive other rewards (promotions, bonuses, etc.). The link between hard work and additional pay is a good one to make and demonstrates that you are the one who can rescue yourself.
A good technique here is creating a list of special chores with a specific dollar amount attached to each. This list can include anything beyond the routine tasks that your child is expected to perform not for an allowance but because she is a member of the family. While your children may be expected to shovel snow in winter and rake leaves in fall, they may not be expected to clean out the attic. This is a special project, and thus you might include that on the list. Don’t keep this list a secret. Post it somewhere and make your children aware that if they run short of money or want to make more in order to buy a specific item, they can take advantage of these tasks.
Don’t overlook the importance of an allowance. Used appropriately, an allowance provides an opportunity for our children to learn about managing money and making choices in the real world.
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Jon and Eileen Gallo are the founders of the Gallo Institute, and authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (Contemporary Books/ McGraw-Hill) Through the institute, they help people explore the emotional and psychological issues surrounding money. Eileen is a psychotherapist (Ph.D.) and Jon a nationally respected estate-planning attorney (J.D.). For more information, visit www.galloinstitute.org. Also, thanks to www.parentingbookmark.com.
