Allowance & Small Kids: 7 Tips For Money-Savvy Parenting

Growing up, I didn’t get paid to do the dishes.

My wife did, though.

On the other hand, my allowance depended on my school grades!
(it’s true!)

We learn how to handle money from our parents!

Obviously, we had to figure out how WE wanted to handle allowance. Is it like a “salary” for helping out – or what is it, really?

We need a good balance between unpaid chores and paid chores – and we need to figure out how allowance plays into all this.

It’s a lot to figure out.

How We Ended Up Handling Allowance Money

When our kid turned 5, we decided it was time to introduce an allowance.

I’ve no idea if this was the right time, but this was the time when he started asking about it. So, I assume some of his friends started getting an allowance.

Around this time, we wanted to establish some new rules – such as:

  • no hitting
  • no bad language
  • stay in bed when we say goodnight
  • and more.

So, here’s what we ended up doing:

He gets $2 every Friday, which he can spend on whatever he wants (typically candy).

But… there’s a catch!
When he’s breaking the rules, we deduct 10 cents. That means that he often ends up with closer to $1-$1.5.

We’re not following this strictly, though.

We try to give him a few warnings first, but it’s a really helpful motivator when we need him to do as he’s told.

Maybe it would be better to have a “reward system” rather than a “punishment system” (where he’d start at zero and earn money rather than lose money when misbehaving).

Or maybe we should totally disconnect allowance from actions/behavior.

Who knows–there are LOTS of conflicting opinions on this online!

But this works well for us, and we really needed something to motivate him to comply.

(Remember, we have a pretty strong-willed kid!)

How Our Friends Do This

All kids are different, and sometimes other “systems” for an allowance make more sense.

Our neighbors have a really cool system.

They have 3 jars:

  • A jar for money to spend (however they want)
  • A jar for money to save
  • A jar for money to donate

I think that’s a GREAT way to teach generosity.

I love it!

We also have friends who give their small kids way more than $2 per week. There are lots of ways to do it.

Allowance for Kids: Let’s Break it Down

How old should my kid be to get an allowance?

Many parenting experts suggest that 6 years is a suitable age to start giving an allowance.

In my experience, this is a personal decision that you as the parent/s need to agree on.

You also need to have a conversation with your kid about why it is or isn’t the right time.

How much should I give my kid?

This can be a tricky question.

The answer really depends on your personal finances and attitude toward money.

Most parents give an allowance to teach their child how to be responsible with money.

One of the best ways we can teach financial management is by being responsible with money ourselves.

Look at your monthly budget to see if there is any room for an allowance for your kid/s.

Here are some ideas that parents use to figure out “how much”:

$1-$2 per week for their age – for example:

  • a 5-year-old gets $5 to $10 each week,
  • an 11-year-old gets $11-$22 per week,
  • (or cut this in half if it seems too steep).

“Price” the chores – but set a limit!

This can help kids decide what they want to work for–choice can be empowering.

  • Throwing out the trash each week $0.50
  • Washing the dog $1.00
  • Washing the dishes $1.00

Needs and Wants – A larger allowance requires more responsibility from your kid.

What do you think your child should have to pay for themselves?

Here are some ideas:

  • Food – parent/s cover this
  • Weather-appropriate clothing – parents pay
  • Candy – kid expense
  • New toy – kid expense + parent guidance; you can teach them how to set a goal and save

I’ve written more about goal-setting in my blog about raising self-confident kids.

How to Actually Give the Money to My Kid?

Some suggestions to get you thinking:

  • A piggy bank – kid’s in charge (within reason)
  • The Jars (mentioned earlier) – together, decide with your kid how much to put in each jar
  • Open a bank account – fixed fees and interest (real-life stuff)
  • Some parents even deduct “tax” before handing over the allowance! – ouch, a taste of grown-up life!

Do Most Parents Give Allowances?

Stats show that in the USA:

  • about 43% of parents regularly talk to their kids about finances
  • over 70% of parents give some form of allowance
  • most parents require their kids to earn their allowance

How Do I Talk to My Kid About Finances?

Kids are smart.

Your children pick up on your conversations or habits around saving, spending, and giving.

This can be a good or a bad thing!

I think that all money conversations should be honest (in an age-appropriate way).

It’s really important that we have conversations with our kids about money – it’s crucial our kids are financially literate. 

We need to be honest about the why when it comes to money:

  • Why can’t I have it now?
  • Why do I have to save?
  • etc.

And, importantly, avoid shaming.

Instead of, “you did WHAT with your allowance?!” … Rather, “hmm, why don’t we talk about this?”

Shaming our kids can make them avoid sharing with us.

If you’re like me, you want your kid to know they can always come to you–in times of success and times of mistakes.

Thanks for reading!

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