“What do you think, Mom? Should I get the hair accessory kit or the ice skating outfit?” My daughter was trying to make up her mind about what to purchase at the American Girl store. She had saved her money all year—allowances, birthday money from grandparents, earnings from completing extra chores—for this very special trip. And now she was dealing with a very real problem. How should she spend her money? There were so many choices and so little money. (Not to mention limited storage space once we returned home!)
Whether you give your children an allowance or not, there are advantages and disadvantages to doing so. Here is a look at both sides of the allowance debate as well as what we do in our home.
Advantages to Giving Children an Allowance
Children learn money management skills in a safe environment.
Learning to budget at an early age is a very important life skill. This is especially true in our current culture where it is easier than ever to “charge it” and worry about the consequences later. Learning how to save up for larger purchases, think twice about making an impulse buy, and comparison shop are skills that will benefit your children for decades to come.
The cost of a mistake is lower when your child is younger, and he is considering whether to purchase a toy or go to the movies, than when he is older and must decide between going out to eat or saving for a large purchase such as buying a home or paying off student loans.
Children learn to be generous and tithe.
I have heard many people in church talk about how difficult it was to begin tithing. It was not in their budget of mostly fixed expenses so they had to start small and slowly increase the amount they gave to the church each year.
I am very thankful that my parents encouraged the practice of tithing very early. I began working at my dad’s accounting business in kindergarten and my parents taught me to tithe off my earnings even then. My mother-in-law also encouraged my husband to tithe. So when we married and set up our first budget, we tithed from the beginning.
Children gain experience handling money.
If children have a bank account, they will learn how to deposit and withdraw money from the bank. We have had several bank tellers comment how glad they are to see my girls practice filling out a deposit slip to deposit their money. They have quite a few adults come who do not know how to fill out a deposit slip.
Children also gain experience with the concept that the bank is keeping their money in a safe place, but the money is available to them when they need or want it. Along the same lines, they can only withdraw an amount of money equal to what they deposited. This will be important when they have their first credit card and need to know not to spend more than they earn.
It is easier to not buy additional things for your children.
Children always seem to want more, more, more. If your children receive an allowance, they can save up to purchase some of those additional toys, games, and books that they really want. You do not have to feel bad telling them no. And because they have a limited amount of money, they will have to choose carefully what they really want to purchase.
Disadvantages to Giving Children an Allowance
Children develop an attitude of entitlement.
If they do not see the connection between contributing to the family and their allowance, they may development an attitude of entitlement. There are ways to overcome this and every family approaches it differently. Some families track that chores are completed and only pay if all chores have been completed for the week. Others pay for each chore completed.
We expect our children to help with the household chores without pay. This is considered being a part of the family. We do pay them for completing extra chores around the house such as cleaning out the garage, weeding, or helping out with other household tasks as they come up. Instead of paying a specific amount for each chore, we made it simple and pay them by the hour.
Children may make a poor choice when spending their money.
It is true that children may make a poor choice when choosing how to spend their money. But this is part of the learning process that is valuable to learn now when the cost of a mistake is less.
It is difficult for large families or families with a small budget.
It can be difficult to find extra money to give children an allowance when your budget is already tight. If you decide you want to give your children an allowance, you may need to be creative to find a way to make it happen.
How We Give Our Children an Allowance
As you probably already know, each family needs to decide if it is best for their family to give their children an allowance and how they want to implement it. Listed below is how we chose to implement an allowance for our children. By no means am I saying you should do this in the same manner, but want to provide some ideas to help you start thinking about it.
- We began by giving our children an allowance of $1 per week at age five. This amount was chosen because it was small, yet it was easy to give them ten dimes and teach them the concept of tithing 10% to the church. You could just as easily choose to give $.10 per week or $1 per month if that is a better fit for your family.
- As our children matured, we increased the amount they receive to $10 per month. Again, the amount was chosen because it was small and easy to reinforce tithing. We moved to a monthly payout because it was easier for me to implement. We will probably keep this amount the same through high school.
- We expect them to contribute around the house. They have assigned daily and weekly chores as well as being expected to help willingly when requested.
- Occasionally, if they help with a particularly large chore, I will pay them after the fact if they had a good attitude about helping. I do not do this all of the time so they do not expect it.
- They are able to earn additional money by completing chores that are not assigned to them. Examples include sweeping out the garage and weeding. For simplicity, we pay for each hour worked.
- On allowance day, they immediately separate their money into three envelopes: donate, save, spend. If they want to save for a specific item, they will often make an additional envelope to start saving up. When they have more than $30 in their spend and save envelopes or receive money gifts for their birthday, they deposit that money into their bank account.
- They are expected to purchase gifts for each other for birthdays and Christmas with their money.