An allowance is a great way to teach your kids useful money skills. But to be effective, it needs to be part of your family’s routine. Here are a few dos and don’ts to help you and your kids manage an allowance.
Related: Average allowance by age
Should children earn their allowance?
Some parents believe paying their kids an allowance for doing chores teaches them the value of hard work and responsibility. Others feel chores are a necessary part of family life and shouldn’t be tied to an allowance.
Some parents take the middle ground. They give an allowance their children can top up by doing additional chores beyond their regular responsibilities.
Should your children earn their allowance? Ultimately, it’s a matter of personal choice. Only you can decide what works best for your family.
If you decide to link your kids’ allowance to chores, it's important to set clear expectations and rules. Make sure your child understands what’s expected of them and what they’ll earn in return.
If you choose to give an allowance without any strings attached, it’s still essential to teach your child the value of money and how to manage it responsibly. Encourage them to save some of their allowance and discuss ways to use their money wisely.
How to manage giving an allowance: dos and don’ts
Do set clear expectations
Be specific about the amount of allowance your child will recieve and when you’ll be giving it. If you’re linking your child’s allowance to certain tasks or chores, make sure they know exactly what’s expected in return. You’ll avoid arguments or misunderstandings down the line if you’re clear from the outset.
Do pay regularly
Pay your child their allowance on the same day each week or month. It builds trust and reduces ‘bargaining’. Regular allowance also helps them understand the value of a consistent income., it’ll teach them how to make their allowance last from one ‘payday’ to the next.
According to our latest GoHenry Youth Economy Report, allowance is usually paid on a Friday (34%) or Saturday (25%). But whether it’s every Saturday morning or every Wednesday after soccer practice makes no difference. Decide on a day and stick to it.
Do use it as a learning opportunity
An allowance is a great opportunity to teach your child money management skills. You can use it to teach them how to budget and save and explore ways they can make the most of their money by explaining interest and investing. You’ll be helping them make better informed financial decisions in the future.
Don't tie it to behavior
Tying an allowance to behavior sends the wrong message. Linking money to punishment or reward is not your goal here. You’re trying to teach your children to live within their means. And that’s something they can only learn if they know they can rely on receiving a set amount of money at a set time.
Don't make it too high or too low
How much allowance you should give your kids depends on their age and level of responsibility. How much you decide to give will also depend on what you can afford and think is fair. But you need to pitch it right. Too high and you risk a sense of entitlement. Too low and you could discourage your child from saving or budgeting.
Do require them to pay for some of their own expenses
Regardless of where you set your children's allowance, make sure they’re spending some of their own money for their needs and wants. Be clear about the expenses you are covering and the ones that they are responsible for. If you're covering school lunches, kids could pay for afterschool snacks out of their allowance, be sure they know so they can budget.
Don't bail them out
Let your children learn from their mistakes. If they fritter away their allowance as soon as they get it, don’t be tempted to bail them out. Instead, let them learn the consequences of their actions. It’ll encourage them to be more responsible with their money in the future.
Don't forget to communicate
Communication is key when it comes to an allowance.
As Beth Zemble, GoHenry’s VP of Education says, “Giving your kids an allowance isn’t just about giving them money. It’s an opportunity to start a financial conversation with them. Use allowance as an opportunity to find out what they want to buy and discuss the importance of savings goals. Talk about the time it will take to save for a desired item. Is it worth it? After a purchase is made, find out how they feel about it. Ask them: Was it a good purchase? Are you happy or sad that you spent your money? Do you wish you had saved for something else? Or do you feel satisfied with what you bought? By talking through the process and helping them learn from successes and mistakes you’ll help them develop money confidence.”
Teaching your kids and teens to manage their own allowance: dos and dont’s
Do encourage them to budget
Help your child create a budget. Explain it’s a plan to help them control their money and make it work for them. Show them how budgeting works. You could use your household budget as an example. But there are lots of fun ways to teach kids about budgeting too.
Do encourage them to save
Encourage your child to save a portion of their allowance and set up savings goals.
Make it fun by letting them choose a savings goal that's meaningful to them, and then work together to create a plan to achieve it. This will teach them how to plan and prioritize their spending and set them up for financial success in the future.
Explain the importance of saving for the future, and how to make their money work for them. Consider matching their savings to give them an extra incentive to put money aside. You could open a savings account for them too, so they can see their money grow.
Related: Teach kids about savings early to build good financial habits
Do teach them to prioritize
Teach your child to spend wisely. Encourage them to prioritize saving for their goals over instant gratification and spend money on things that provide long-term value.
Do discuss wants vs needs
To help them make informed spending decisions, discuss the difference between wants and needs with your child. Encourage them to think carefully about whether they really need something before they buy it. If it's a want -- will they want it again in 24 hours? Ask them to sleep on it. This will help them avoid overspending and learn to live within their means.
Don't micromanage
While it’s important to set clear expectations and guidelines for how your child can use their allowance, you want to avoid micromanaging their spending. Give them the freedom to make their own decisions and learn from their mistakes.
Don't give in to demands
You want to be flexible and listen to your child's concerns, but it’s best to avoid giving into any demands for more allowance. Stick to the amount you agreed and suggest they work for extra money if they think they need it. You’ll be helping them make them connect money as a reward for hard work too.
Don’t forget to praise
When your child makes wise financial decisions and reaches their savings goals, be sure to praise them for their efforts. This will help build their confidence in managing their own money.
How GoHenry’s app can help
GoHenry makes managing your child’s allowance easy. A prepaid debit card for kids aged 6-18, it comes with a companion app for parents. You can set up a regular allowance payment, monitor your child’s spending, set limits, and block certain types of purchases — all through the app. So while your child gets a taste of financial independence, you get peace of mind.
What’s more, our in-app Money Missions tool for kids is designed to accelerate financial literacy where they will learn money basics like budgeting, saving and much more. All through fun, interactive games and videos.
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Does an allowance teach independence
Benefits of giving an allowance
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