Allowance for Kids
How to set up your allowance for kids so that it acts like your child's money training wheels.
Allowance for kids can be a touchy subject.
First, there’s figuring out whether or not you should pay kids to do chores, if you should pay for grades, or if you should just give an allowance.
And if you DO decide to pay for chores, you then have to figure things out like:
- how much should you pay your child for chores (juggling their age, responsibilities, etc.)
- what kind of chore oversight will you complete and what's expected of each chore before your child can get paid
- what chores are age appropriate
- and so much more.
On top of this, there are all types of gurus telling you that only one way − THEIR way − is the best, like Dave Ramsey's Allowance system (which is purely chore-based), or Suze's rule about not rewarding good behavior with money, or insert some other guru's allowance rules.
It can get completely overwhelming to choose something that you, as a parent, want to get “right”.
Fortunately, I'm here to help guide you through each of the decisions you need to make so that you can pick the best allowance system for your child + your family in a way that doesn’t make you want to pull your hair out.
But first up? I want to clear up a huuuugggeeee misconception about any type of allowance.
Allowances for Kids are Not Money Lessons
You read that right, Mama Bear.
Just giving children an allowance alone − whether from earning it through chores, projects, or handing it over − is not a money lesson that will make your child any financially savvier than kids who never received an allowance at all.
And I'm not just saying that to grab your attention by scratching cross-grain.
There's real research to back it up.
The study where this information originally came from was by Professor Lewis Mandell, who looked through all of the allowance studies from the last 50 years and found a really crazy outcome:
He found that kids who received an allowance were actually LESS financially savvy than kids who did not.
EXCEPT − and this is a B.I.G. exception − when parents gave a child allowance + talked with their kids about managing their new money.
Now THOSE were the kids who moved ahead in money-savviness.
Kinda shocking research, right?
I mean, before pouring through a Library of Congress-sized room of research, I would've thought that kids who received an allowance would be about three rungs up on the ladder from kids who never got to touch the green stuff.
Pssst: in case you’re questioning the information, know that T. Rowe Price found something similarly convincing about the importance of money conversations on top of allowances in their 2014 Kids & Money Survey. According to their results, Teachable Money Moments are über important (the kind that get sparked by my free, fun Money Conversation Starters for kids.
Having said all that, an allowance can be one of the best ways to teach your kids about money. That is, along as you have an allowance system.
You Need More than an Allowance – You Need an Allowance System
The research is in. We both know an allowance alone is not going to cut it.
And I want you to knock teaching-your-child-about-money out of Minute Maid Park (any Houstonians here?)!
To do that, you need an entire system that ties your money goals for your child into its very design so that they can self-discover critical money lessons. It’s like creating your own money incubator!
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