Allowing Allowance

Each week, our Patch moms answer the questions that affect family life. Do you have questions? Tell us!

Question: When is it too young to give allowance? When is it too old to give allowance? When should they start paying for their own things?

Answer:  I just love this question.  Not only do I have a financial background, but being a parent and watching kids with their own money is really cool.

I think it's never too young to start teaching your kids about money. My mother-in-law gives the kids a gift card with money on it, and they think it's the coolest thing. At 5 years old, my stepdaughter would carry it around and call it her credit card and couldn't wait to use it. 

Even at 5 years old, giving a dollar every week for cleaning their room will not only keep their room clean, but it starts teaching them about money. Will they save it? Will they spend it right away?

If your kids are anything like my brother, he NEVER spent his allowance. He hoarded it until he had enough to buy what he wanted. He would ask, “How much is the telescope? It's $50? OK, I'll wait.” He would count his quarters and dollars. As he got older, he would mow the neighbor’s lawn to get extra.

As kids get older, the question is: When do we stop and let them get a job? Well, first, as kids are getting older, you can give them more chores to do and pay them for doing their chores. Once they are old enough to babysit or get a job, then that should take over for allowance.

Having a part-time job will teach kids a lot about responsibility, punctuality and so forth. They will get a check for how hard they worked. But, how do they spend that? It's more than Mom and Dad's allowance!

Here's the goal: to teach kids how to become responsible with money and not to lean on credit cards. They need to be able to pay bills as well. I'm not talking about helping out with your mortgage; I'm talking about their cellphones, or a portion of the car insurance on the car they are driving. 

Having kids pay for part of what they are using shows them how to pay bills and how to budget. If I have $100, and $50 goes to the cellphone, that leaves me $50. Or, I want to go on a trip with my friends, and it will cost $300—how many weeks will it take to save that amount?

All these things teach kids good money techniques early. I remember going to college and getting bombarded with credit card offers. They would even address me with, “Do you have enough money for all your books?”  Kids who don't know how money works will fall into traps.

So I say, start as young as you can! Give them a list of things they have to do for the money, even as they get older. My mom had me sit down with her when she did the bills when I hit my teens. It taught me a lot about budgeting.

Don't be afraid to start saying, “I am not going to pay for this anymore; it is now your responsibility.”

Pam Whitlock March 24, 2011 at 04:32 PM
Love your comment --- "I am not going to pay for this anymore, it is now your responsibility!" Kids are much more thoughtful and careful when spending their own money, as opposed to Mom's money. I have four kids, ages 8 - 17. We give them each a very small weekly allowance, certain chores that are just expected and optional jobs to earn more money. Our older kids have to budget and save for big items, like iPods or extra school trips. I think parents also have to be willing to let their children make mistakes with money while they are young and the consequences are minor. It is better to "blow" $10 on a toy than to run up $1000 or more in credit card debt in college. My husband and I own MoneyTrail.net, a free online allowance and money management system for kids, teens and families. Kids and teens learn to track their own saving and spending. We started this to solve the problem of keeping track of allowances and IOUs with our own children and have now used it to create a website for families.
Eric Gneckow March 24, 2011 at 05:41 PM
It's amazing how far you can stretch a few bucks when you're a kid. When I had $20 in my pocket, I was rich!
Maria Phillips March 24, 2011 at 06:18 PM
I will definitely be checking out that website! That sounds perfect! Everyone needs to look into that.
Marlene March 24, 2011 at 07:48 PM
Great topic! You can do hybrid of allowance and money earned for chores. Everyone has to figure out what is best for their family, and reflects their values. Allowance just for the sake of it is really an entitlement and kids don't learn much in that way. At www.threejars.com, this topic is very important to us. We believe allowance is a powerful financial teaching tool, and that kids learn by doing. We have calculators, chore trackers and lots of great tools for parent to automatically track money earned and encourage kids to save. It's all done in a fun and interactive way so that kids stay engaged in the subject.
Bill at FamZoo March 29, 2011 at 01:45 AM
We've had really good luck with having our teens handle their own clothing purchases. We make them propose a budget, negotiate it with us, and then manage to the number. Great way to practice budgeting before they hit the real world. Another idea I really like is the Family 401(k) idea from Dan Kadlec which involves setting up a Roth IRA for teens who earn W-2 income and making matching contributions to it. Great way to get them started early on a retirement plan. They're gonna need it! Just did this for two of my older teens based on their summer job income. Article is here: http://moneywatch.bnet.com/saving-money/blog/bank-dad/kids-and-money-start-them-early-with-a-family-401k/461/


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