Lending Club Blog

5 Questions to Ask Before Giving Your Child an Allowance

Parents choose to give their children an allowance in lieu of (or in addition to) earnings from a part-time job for a number of reasons. Children may be too young to work at a traditional job, parents may prefer that their children focus on school work or enjoy their childhood, or the allowance may simply be a means of teaching money lessons in a tangible way. Once the decision to give an allowance has been made, the following interconnected questions must also be considered:

What Age Should You Start At?

While it’s never too soon to start many of life’s lessons, introducing money at too young an age may taint the innocence of youth. Beginning before basic math skills have developed may also make the concept of money seem complex, even though basic finance is quite simple. Waiting too long before introducing the concept may allow misconceptions about money to form. Every child is different, but sometime between ages 7-10 may be most appropriate.

How Much Should You Give?

The amount of allowance will likely be set relative to the type of lifestyle you yourself lead, as well as the other factors listed here. A dollar a month may suffice in certain situations and significantly more ($100 a week or more) may be warranted in others. You may also set a base limit that can be increased when certain criteria are met.

What is Expected for the Money?

Is good behavior, success in school, completion of chores, or a combination of all of these (and more) required for allowance payments to continue? Establishing the expectations that accompany the allowance will set a standard of fairness and help to avoid confusion.

What Must Be Paid For With the Allowance?

Will the allowance have to cover basic needs or just discretionary spending? Obviously the former case will require a much larger allowance. In the latter case, you might supplement the allowance with an occasional discussion of the cost of other items provided, to give insight into the costs of running a household.

What is the Purpose of the Allowance?

Is the allowance given to teach lessons about money, grant freedom in spending, or for some other purpose? Defining this purpose will help to establish many of the answers to the other questions posed here. If you give your kids an allowance simply because their friends get one (or you got one at their age) you may miss out on the value an allowance has to offer.

As I said above, these questions are all inter-related. As a result, you can probably answer whichever one seems easiest to you first, and then build on that answer to help answer the rest. I suspect that many people will choose to answer the purpose question first, since there is usually an underlying inspiration for considering an allowance to begin with. Whichever order you choose to answer the questions in, asking yourself these five questions before giving your child an allowance will help to make the experience as beneficial as possible.

How did you answer each of these questions?

Thursday, January 29th, 2009 at 6:25 am

Comments (3)

  1. Mike, thanks for the well-timed post. I’ve been talking with my
    wife about starting an allowance for my oldest daughter. We are
    worried she might be too young. I liked your comment about making
    sure she understands basic math/money skills first.

    January 29th, 2009 at 7:37 am

  2. @Tom: I’m glad the post and comments helped. Let us know what you
    decide and how it works out for you. I also wanted to mention to
    everyone that there’s nothing wrong with doing a trial run with an
    allowance. As long as you and your children all understand that
    it’s a trial (for a few weeks, month, etc) there shouldn’t be hurt
    feelings if it doesn’t work out and needs to be stopped. If you
    decide to start small, remember that many coins/bills will work
    better than a single larger bill. It’s hard to save part of a five
    dollar bill, but easy to tuck one of five singles into a hiding
    spot. Obviously, coins can be a choking hazard, so only give them
    to older children.

    January 29th, 2009 at 6:06 pm

  3. Wealth / Money Expert for Teens – sharing the ‘best of the
    web’ this week…
    Teaching your teen about money – a
    wealth of resources and information at your fingertips: 5 questions
    to ask before giving your child an allowance Money tips for little
    pockets Gen Y ‘financially unfit’ says poll The allowance question
    20…

    February 15th, 2009 at 12:57 pm

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