Giving an allowance to children might not be right for every family. But it can be a useful way to help kids learn about managing money for those who choose to include it as part of their child’s financial education. When they get a regular allowance, children can learn how to budget money and begin to develop crucial money management skills. But what age is the right age to start giving an allowance to your kids?
Related: The average allowance by age
What age should I start giving an allowance?
There is no specific age as to when you should start giving an allowance to your children. It very much depends on your family, your child, your means and your motivation. Giving an allowance can stem from wanting to help your child become financially literate to wanting to show children that money doesn't ‘grow on trees’. It's also a way of teaching your children about the benefits of saving, budgeting and investing,.
A new study, from Brigham Young University showing that children who are given opportunities to manage money when they're young are more likely to be financially responsible as they enter adulthood, says a new study. The results found that while it was important for parents to talk to their kids about money management this wasn’t enough to empower children financially. The research found the most effective thing a parent can do is to provide experiential learning opportunities for their children, allowing them to oversee their own money and practice making financial decisions.
The study's authors conclude that this type of learning can be a positive influence on children's financial literacy. It can help them to learn about the value of money, how to manage it, and how to make sound financial decisions.
Meaning whatever age you decide to give an allowance, try not to leave it too late. It’s important for kids to learn about how to manage their money before they are teens out and about without you.
Signs your child may be ready for an allowance
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They ask for an allowance. Kids usually learn the concept of an allowance from friends. If they ask for it, use it as an opportunity to discuss what an allowance is, what it could be used for and how they can manage their money.
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They’re becoming more independent. This starts to happen around middle school grades 6 - 8, as children start to build a life outside the home. At this point they will need their own money and need to know how to spend and budget their cash.
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They understand delayed gratification and saving for a short-term goal, such as buying a toy or saving up for clothes.
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They want to earn some money but are too young to get a part time job. If this is the case you could link an allowance to doing chores and tasks around the home.
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They have shown an interest in money in general and you want to start teaching them more about money, saving and finances.
For some parents who decide to give an allowance to their kids, a common question is how much to give. Louise Hill, Co-founder and COO of GoHenry says, "It really doesn't matter how much allowance you give, but if you can give children some money in any way shape or form, whatever you can afford, that they can control, and they can make decisions over, then that's the biggest empowerment you can give your kids. It lets them make decisions, it lets them make mistakes, and they will learn. And not only will it help them better understand how to manage money now, but in the future too.”
Data from GoHenry's latest Youth Economy Report reveals what GoHenry parents are paying:
|
Age |
Average Amount of Weekly Allowance |
|
7 |
$5.06 |
|
8 |
$5.17 |
|
9 |
$5.75 |
|
10 |
$6.45 |
|
11 |
$7.31 |
|
12 |
$8.65 |
|
13 |
$10.33 |
|
14 |
$12.22 |
|
15 |
$13.42 |
|
16 |
$15.40 |
|
17 |
$16.85 |
|
18 |
$16.34 |
Why introduce an allowance?
There are plenty of benefits of giving your child an allowance. It's a great way to kick start your children's financial education. It starts them off on the journey of learning about money management and making decisions about budgeting, spending and saving. It also teaches them crucial financial planning skills and can even help them avoid getting into debt in adulthood.
Beth Zemble, VP for Education at GoHenry, says: “Giving your kids an allowance isn’t just giving them money, it’s giving them the opportunity to grow their financial skill set to become more capable and independent adults. With an allowance you give them the opportunity to have real life practice with skills like planning ahead and understanding the concept of delayed gratification so that they can develop money confidence.”
Related: Pros and cons of giving kids an allowance
Saving and budgeting
As many adults will agree, saving and budgeting are not always easy. But if you learn good saving and budgeting habits in childhood, it can become something that you do naturally and without much effort. By getting into the habit of budgeting and saving some of their allowance, your kids should have no problem carrying on these good habits as they get older.
Independence
Getting to grips with money early on can help young people become independent and less reliant on others financially. This is because when you are financially stable, you have more options available to you and better opportunities.
It’s why encouraging kids to be entrepreneurial and setting tasks and chores for an allowance can help children understand both the value of money and their earning potential.
Louise Hill agrees: “Children don’t have to wait until they turn 18 to start earning money. Earning for chores is a powerful exercise that teaches kids financial independence, and ultimately gives much more satisfaction rather than instant gratification.”
Related: Does an allowance teach independence?
Spending responsibilities
An allowance helps teach kids to be more financially responsible, prioritise their own spending and saving, and make more prudent financial decisions down the line. This is because kids have to learn to make their money last, which involves prioritizing spending, saving for larger items and keeping track of their money so they don’t run out.
Appreciation and achievement
Giving children allowance as a reward for doing chores is a good way to show your appreciation for their efforts and acknowledge their achievements. Beth Zemble says: “National standards and frameworks for financial literacy all include understanding finances as integral to financial literacy. Providing kids with payment for chores can help them understand both the value of earning and the value of money by helping them to appreciate the connection between their hard work and the financial gain.”
With the GoHenry app, you can set up paid tasks for your child, and when they complete them, the agreed payment is sent to their GoHenry kids' debit card to reward them for their hard work.
When to stop giving an allowance
Just like when to start giving an allowance, deciding when to stop is up to you. Some parents give their kids money until they’re 18, but others stop at a younger age, maybe when kids get part-time jobs or start money from their own ventures. Of course, if your child can’t get a job, has too much school work, or needs additional money, you may want to keep giving your child money for longer; the choice is yours.
How to talk to your child about stopping an allowance
If you decide to stop giving an allowance, openly discuss it like you would discuss all other aspects of money with your kids.
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Be open and clear about what you are doing and why.
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Be prepared for questions. Your child may want to know why you are ending it and what they will do without it. Be prepared to answer hard questions in a way that they can understand.
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Be understanding. Your child may be upset or angry when you tell them you are ending their allowance. This is a natural and normal reaction that they will understand if you are clear about why you are doing it.
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Be patient. It may take some time for your child to adjust to the change and stop coming to the bank of mom and dad.
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Make ending an allowance a valuable learning experience by encouraging them to be entrepreneurial. There are several things they can do if they don't get money from you such as get a part-time job. Do extra chores for money around the house and even sell stuff they no longer need on online marketplaces. As Beth Zemble says, "Just remember – if kids aren't given any opportunity to earn money, but are just given money, they lose an opportunity to practise financial decision-making skills and develop habits that will inform their future financial capability."
Use GoHenry to give your kids their allowance
If you decide the time is right to start giving your children an allowance, GoHenry makes it quick and easy. You can open a GoHenry account online or by using the app. You can then order your children's personalised GoHenry prepaid cards, set up regular allowance payments or one-off transfers, set tasks and spending limits, and invite relatives to contribute via Giftlinks.
For your kids, the GoHenry allowance app is packed with benefits. They can earn money by completing tasks, set savings goals and use their GoHenry prepaid debit card in shops, online and at ATMs. What's more, with Money Missions, they can develop their money skills and learn everything from budgeting and saving to investing and giving.
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