There are pros and cons for paying your kids an allowance. It can teach them about money, and it's also a great way to demonstrate that doing chores is a way to contribute to the family.
Here are a few things you might think about as you decide what makes the most sense for your household.
Benefits of giving your kids an allowance
It helps them learn money management.
The biggest advantage to giving your kids an allowance is that it can teach them the basics of money management at a young age. Like most skills, learning good financial habits takes time and practice, so the earlier you start, the better your kids will be. Too many young adults go off to college or get their first job and have very little idea of how to manage their money.
You can scale it as they get older.
Make sure the allowance is an age-appropriate amount that can be scaled as they get older. A 10-year-old is not going to have the same needs or discipline as a 16-year-old. An allowance of $1 per week, per year, is a good rule of thumb. If you want to keep an eye on the types of things your child is spending their money on, you can consider an allowance card or debit card for kids like GoHenry.
You teach your kids financial responsibility.
As you increase the allowance amount, it makes sense to also increase the number of things your child is responsible for. If you are paying $10 for weekly school lunches, you could raise their allowance by $10 a week, and then have them be responsible for their school lunches. That can help teach them the tradeoff between buying lunch at school and packing their lunch to save money.
Concerns for giving kids an allowance
Money for free?
Some parents choose not to give their kids an allowance. One reason is that it may teach kids the wrong message about the value of money. Some studies have shown that people who receive an unconditional allowance have lower financial literacy. In the real world, very few people get money regularly without doing something. Learning the lesson of getting a day's pay for a day's work is something that will be useful as children transition into adulthood.
Paying for jobs kids should do for free?
Some families prefer to assign chores as a duty of living at home and prefer to keep these tasks separate from their allowance. If you do choose to tie an allowance to the successful completion of chores, then other considerations come up. Do you withhold or dock allowance if chores are not done or not done well? Some families find a middle ground by not directly tying an allowance to their child's chores, instead, they opt to pay the allowance separately or only attach payment to extra chores or side projects that kids complete.
An allowance can be part of teaching financial literacy
If you do choose to give your kids an allowance, it's important to regularly check in with them on how they are choosing to spend their money. Let them make mistakes but be there to help them learn from their mistakes. Whether you give your kids an allowance or not, regularly talking with your children about managing their money will help them learn and put them on a road to financial success.