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Should You Give Your Kids an Allowance?

By Grace Hwang Lynch


Mom giving kids allowanceAs a child, you may have heard the refrain, "When you grow up, you can buy that with your own money." But why wait until kids are grown to teach them how to manage cash? Whether or not to give children an allowance is a personal choice for each family. But if you have room in your household budget, giving your kids a weekly stipend can be a powerful teaching tool. When to begin? And how much to give? Here are some tips to help you decide:

  • When are kids ready? When kids begin expressing wants and can tell the difference between all kinds of coins and bills, they are old enough to begin receiving an allowance. Often, that is around preschool age. "It's a good age, when they're forming their good habits," says Laura Levine, Executive Director of the Jump $tart Coalition for Personal Financial Literacy. Sue Butzow, a mother of two from San Jose, California, began giving her sons an allowance when the younger one turned five. "You don't want to wait until they're 15, 16, 17, and that’s their first experience with their own money," says Butzow.
  • Decide how much to give. It doesn't have to be a lot. After all, a preschooler doesn't need to buy many things. A common rule of thumb is "One dollar for every year of age." But really, the amount a child receives for allowance depends on a number of factors, including how much discretionary money is in the family budget and what expenses your child is expected to pay. For example, if your child is supposed to use his allowance money to buy hot lunch at school, he would need to have at least the amount to cover those costs. A child whose allowance is simply "fun money" would probably receive less. Think about how much your family can afford to spend on toys or movies each month, and dole out the weekly amount accordingly.
  • Decide whether you want the allowance to be tied to chores. Or not. Nancy French of Columbia, Tennessee, chooses to tie her children's allowance to completing assigned chores. The French family has a "payday" every Saturday. At that time, they go over a list kept on a dry-erase board to check that the kids have finished their tasks, and then everyone gets paid. Other families follow the philosophy that kids receive an allowance because they are part of the family. They may also have responsibilities around the house, but the two are not directly related. The American Academy of Pediatrics recommends that whichever route you choose, make the guidelines clear.
  • Give small bills. Make sure you go to the bank regularly to get cash in small denominations for allowances. This helps you to be sure you have the right amount and makes it easier for kids to divide up their money for different purposes.
  • Set your family's guidelines for spending money. Is the allowance to be used for necessities, such as clothing and school supplies? Or is it for discretionary spending, such as buying toys or treats? Are there certain types of things that are off-limits, even if a child wants to buy them with her own money? Even if the allowances are simply "fun money," they can still teach kids a lot about budgeting, managing their money, and making choices about how to spend their cash.
  • Parents need to be committed. Set a regular day of the week to distribute allowances and make sure you have the appropriate bills or coins ready. "You can't skip, otherwise you're sending the message that regular payments aren't that important," says Levine.

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Grace Hwang Lynch is a writer, consultant and mom based in the San Francisco Bay area. She blogs about Asian fusion family and food at HapaMama.com.

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