This post may contain affiliate links.
Allowance is always the topic of hot debates among parents. How much allowance should you pay? Should you link allowance to chores? Should you pay actual money or reward “stars”? There are a million questions parents have about allowance and a million opinions about what is right and what is wrong. How and how much allowance to pay, and when to start, is often a hard decision for parents to make. The good news, however, is that there is no right or wrong answer, and no matter which decision you make, giving allowance will likely have a positive effect on your child’s life.
Allowance is a great start to teaching your child financial literacy and money management skills, and many parents agree. According to the Harris Poll on behalf of the American Institute of CPAs (AICPA), three-quarters of parents (75 percent) say the most important purpose of providing an allowance to children is to teach the child about the value of money and financial responsibility.
In addition to being a great conversation starter about money management, allowance, if paid for chores, seems like a perfect tool to teach kids the value of hard work. Teaching kids the value of hard work is 1 of 10 primary purposes of parenting, according to Christine Hammond, a licensed mental health counselor and the author of an award-winning book, The Exhausted Woman’s Handbook*.
So how much allowance should you give to your child? It is really an individual decision, for which it might be useful to consider the following:
Your current financial situation
What is the allowance used for (lunch in school, treats…)
How much you want your child to save
How much you are comfortable with your child spending
What your child will be responsible for paying from now on (their toys, movies with friends, amusement park tickets, etc.)
Please refer to our post on How to Give Your Child Allowance for a more detailed explanation of the above considerations.
Remember, that it is always important to have clear rules for your children. So, once you make the above decisions about allowance, make sure to clearly outline the expectations to your child and stick to them.
On average, an American family pays their children 50 cents to $1 for each year of age in weekly allowance. This means that an average American 10-year-old receives $5-$10 a week. Here's a quick comparison of weekly allowance ranges for kids aged 4 to 18, according to CPA Canada:
Age 4: $2.85 Age 5: $3.15 Age 6: $3.85 Age 7: $4.10 Age 8: $4.32 Age 9: $5.52 Age 10: $7.18 Age 11: $7.92 Age 12: $9.58 Age 13: $9.52 Age 14: $13.47 Age 15: $15.57 Age 16: $17.84 Age 17: $30.66 Age 18: $40.10
Allowance is a great way to start teaching your kids money management skills, and even though these skills are crucial for achieving financial stability, most adults are lacking them. For example, only 61% of Canadians could answer 5 of 7 basic financial literacy questions in the 2015 Organisation for Economic Co-operation and Development (OECD) Survey on Measuring Financial Literacy and Financial Inclusion. According to the Pennygem survey, 98% of parents wish they were educated about financial literacy before adulthood. As parents, we can and should do more to teach our kids financial literacy. That is why we created Pennygem – to provide a tool for parents to teach their kids financial management skills while paying them an allowance. We hope Pennygem will make it fun for kids to earn money and learn to manage it, and easy for parents to pay allowance while helping their kids achieve financial well-being as adults.
See you in our later posts!