When it comes to giving our children an allowance, we tend to focus too much on how and what they do with it, and too little on what we’re actually trying to create for them: a healthy relationship with money. An allowance can be an incredible tool to teach children how to manage money, but only if you give it with as few strings as possible.
Why give your child an allowance?
Between the ages of five and eight is a good time to start an allowance. It provides the opportunity to teach the basics of budgeting, saving, and spending, as well as to develop their mathematic skills. Grade school-aged children typically have an understanding of what money is and what it is for, but very limited ways to earn it. Aside from the tooth fairy or a birthday gift, an allowance is the only opportunity young kids have to get their hands on money of their own.
You should continue your child’s allowance at least until they are old enough to work part-time, at which point they will have an opportunity to earn money on their own. At this point you can either stop their allowance entirely or continue to provide it while they work part-time to earn extra cash. As your child grows up through their teenage years and into early adulthood, you can decide how much financial support you want to continue to provide.
How much allowance should you give your child?
How much you choose to give your child as an allowance depends on your household’s financial situation, what you expect your child to use their allowance for, if your child is able to work part-time to earn extra money, and your own gauge of what you believe is appropriate. If you will pay for all your child’s expenses and an allowance is only for discretionary spending, then a smaller amount makes sense. However, if you expect them to pay for their own extra-curriculars, school field trips, or clothing, then a larger allowance may be necessary.
I personally went with the rule of $1 per year of age per week, so my 5-year-old receives $5 a week in allowance. I loved this rule for its simplicity, but also because it seemed an appropriate amount for my child’s spending. As she ages and her tastes expand beyond the Dollarama toy aisle, I expect her allowance won’t go as far. A 15-year-old may not find $15 a week adequate for all their wants, but a 15-year-old is also old enough to work part-time if they want extra money.
Receiving an allowance shouldn’t have a catch
While many parents are tempted to tie allowance to chores, paying children to complete basic household tasks sends the wrong message. It communicates that maintaining a comfortable and clean-living space is not an end unto itself. Your child should learn how to wash dishes, vacuum carpets, and clean bathrooms, not to earn money, but because these tasks are the bare minimum to maintain a home. After all, you’re not paid to do these things.
If there are additional special tasks you need done around the home, like shovelling snowy sidewalks, you might choose to pay your child to complete them, but these should always be extra and optional.
Some parents exert additional rules, such as sorting a certain percentage of their children’s allowance into categories like saving, spending, and charity. This unnecessarily complicates allowance – forcing the parent’s values around money onto their children. It seems well-intentioned but overbearing: You can teach these concepts without imposing them.
Lead by example
I’ve taken the approach of being transparent with my child about things like tipping and charitable giving. I explain to her why we give, how much we give, and then lead by example with my own money. I know I won’t be able to control my child’s money in adulthood, so I don’t overreach into her finances when she’s young either. It’s more important to me that my daughter spends her money how she wants than it is that she spends it how I want – even if there will be times when I disagree with her choices.
Sometimes we think we’re teaching children financial literacy, but all we’re really doing is passing down generational money trauma. In our efforts to teach our children “personal responsibility” we ironically end up micromanaging their finances to the point that they cannot learn to do it themselves.
In doing so we communicate to our children that money is a scarce resource they cannot be fully trusted with. I want my child to feel confident and comfortable with money, and I know the only way she can do that is through the experience of managing it without my interference.
An allowance is fundamentally an exercise in financial autonomy. It teaches children the practical basics of money management, while also giving them disposable income to enjoy. If you want your child to be good with money in adulthood, then give them money and let them spend it freely in childhood.