How To Give Your Child An Allowance

By Mike

Before I start with this morning’s article, I want to ask you to vote for me in the Free Money Finance March Madness contest. The best personal finance article will win the right to give $1,000 (generously provided by FMM) to a charity of your choice. I have selected a charity that helps children. Please comment on this post with the word “figures”. Thx a million!

A few weeks ago, I wrote a quick 3 part series about how to teach your children about money. Teaching money management is probably one of the most important legacies you can prepare for your children. Making a budget, saving money and avoiding credit abuse are fundamentals that everyone should be aware of, especially our youth. One of the first tools you can use to teach your children about money is by giving them an allowance. However, there are certain rules to apply if you want your children to benefit from this experience.

Rule #1; present the allowance as a privilege

Money is not a given, it has to be earned. This is true at any age. If you give your child an allowance, he should know that it is not automatic. It is important to explain why he receives this allowance (keeping his room tidy, washing the dishes, etc.) and that not everybody receives one.

No matter the amount, the value of working and earning an income is more important than the allowance itself. On the other hand, I think that by telling your kids why they receive their allowance, it makes it easier to explain when they don’t do their chores.

Rule #2; no cash advances

Our children will learn faster than we expect to live off credit. And the first lender they will approach is the “Mom & Dad Bank; founded since your date of birth”. So don’t play the payday loan or cash advance service with your children. If they need more money to buy something, they will have to wait until it’s payday before cashing their allowance.

Rule #3; money is not everything

I am a big advocate of making more money year after year. But I don’t really believe in the almighty back; I like what it can give me access to; special moments, treats, comfort and security. As you will always find someone doing your job with a better pay check than yours, your son will surely find one of his friends making a bigger allowance (and maybe doing less work that he does!).

I don’t think the amount of the allowance matters. However, it will to your kid! This is why I will try to spend time with my son and explain that he does help us and we appreciate it. I will also tell him that it is the maximum amount I can give him right now and that we all have to learn to live with this amount; this is called budgeting ;-)

Rule #4; when should we give the first allowance?

This is always a big question. I am currently asking this question as my son will turn 5 this year and will start school this autumn. I didn’t talk about this with my wife yet but I think I will start when he enters school.

Receiving an allowance is also a milestone in a child’s life. This is living proof that he is growing and that he can become more responsible. Since he will start school, I think it would be a good way to show him that going to school is like going to work.

I don’t expect to give him much at first, especially since I want to start at such a young age. Probably $1 or $2 a week. Just so he can start calculating how much he makes per month and realize that he can go to the dollar store to buy a toy at the end of the month. It won’t really affect my budget and we will start a great money lesson.

Your take: How do you manage allowances?

As a young parent, I am not exactly quite sure how/when to give child allowance. What is your experience with kids and money?

Author: Mike.

Image source: yup that is my 2 kids ;-)

11 Responses (including trackbacks) to “How To Give Your Child An Allowance”

  1. Mike Says:


  2. Jolyn@Budgets are the New Black Says:

    I devised an allowance system for our 14yo where he receives a set amount each month, and he’s expected to so certain chores and generally help out around the house as asked. Then, if he doesn’t do a certain chore, he is required to pay a certain amount to the person who had to do it for him.
    This is a work in progress, but it is working out brilliantly. No more nagging! Money speaks to him much louder than I ever did.



  3. Roshawn @ Watson Inc Says:

    I never received an allowance but rather got paid for certain chores. I guess this is another option.

  4. Angie Says:

    I found a great piggy bank with four slots-Saving,Spending,Donation, and Investment. My 7 year old gets a dime for each chore he does and he usually earns between $2 to $3 a week. We divide the money up 25%Save,15%Spend,10%Donation, and 50%Investment. He is saving for a Wii, Spending goes for icecream or small toy, Donation has not been decided yet, either food pantry or Humane Society. Investment is for a car or college. He loves to earn money by doing his chores so he can put money into the 4 slots each weeks. I am so glad that we finally found something that works for us.Good Luck!

  5. Mike @ Gather Little By Little Says:

    this is a great idea to auto discipline your kid. He is the only one responsible of how much he will receive a the end of the month… very close to the “real world” reality!

  6. MITBeta Says:

    It seems to me that paying kids for chores is different than an allowance. In the first case, kids have a choice: Do chores and get money, or don’t do chores and don’t get money.

    In the second, chores are expected as a part of the membership of the family, and money is allowed to all members, some more than others, as part of the membership of the family.

  7. mb Says:

    good overall post. my family does give “cash advances”. we write them on the calender and enforce paying the money back. not having any cash the next alowance tends to discourage borrowing. relatives with childern have all decided if the kid is old enough to ask for money/ stuff, the kid is old enough to have spending limited to a set amount by alowance.

  8. josh728 Says:

    Tying an allowance to chores is just about the worst thing you can do. As parents we don’t get paid for doing the dishes or mowing the lawn– these are just things we do for the good of the family. By tying allowance to chores we give powerful incentive for our kids to do nothing if they decide they don’t need money that particular week.

    Much better to give an allowance and make it just that– AN ALLOWANCE, that they can budget and spend as they like.

    The BIG caveat on this is that you have to hold firm and make your child buy just everything they want using their allowance. You want a snack at the grocery store? You spend your own money. A video game? The same. We’re willing to spend X amount for sneakers. If you want a more expensive pair than you make up the difference.

    Do this and watch how quickly your child learns to prioritize and manage their money.

  9. Mike @ Gather Little By Little Says:


    See, I don’t think there is a perfect system.

    If you give money to do the chores, you are telling them that chores are related to money. That could deviate your goals to make them understand how to manage money and that sometimes, helping for free is great too!

    But, if you give money to your kids no matter what, you can surely put the emphasis on how to manage this money but you can also show them that money is free and that you don’t have to work for it as there will always be someone to pay for you in the end.

    In my opinion, I prefer paying them for chores and show them that money is hard to gain. However, I will certainly have some discussions about the importance of not just doing things for money. I guess that by not paying for every chores in the house (which would be quite extreme), we can reach a balance.

    thx for your comment!


  10. Patrice@SeekWisdom Says:

    I like the idea of giving a general allowance because its a true opportunity to teach your children how to budget. Growing up, I received an allowance for maintaining good grades and being an overall respectful kid. Chores were just apart of earning your keep. When I went over and beyond or came home with straight As, I received what could be considered a “bonus!” If I got the notion to be sassy or lazy (which was rare), then no allowance.

    One thing about the allowance that I appreciate my mom teaching me is that when it was gone, it was gone! If I didn’t budget it propertly, I could potentially starve at school all week. She also gave me her rules for shopping, which were: #1 If you didn’t bring money, don’t ask OR be ready to pay me back as soon as we walk in the door OR I’ll return it AND #2 General school clothes came with a Parent Price Tag. If my mom’s Parent Price Tag for jeans were $30 and I wanted $75 designer jeans, I’d better have the difference plus tax! Great lessons! “Figures”

  11. Liz Says:

    My kids (ages 7 and 9) each get $5 per week. $1 goes into each of Save, Spend, Donate, Invest, and then there’s a discretionary $1 that they can allocate as they see fit. “Spend” is for day-to-day spending, small items, impulse buys. “Save” is for longer-term planning (they each saved up and paid half the cost of the Nintendo DSs we got them for Christmas last year), “Donate” goes to a cause that they care about (most recently, aid work in Haiti), and “Invest” gets aggregated and invested (via Sharebuilder) annually.

    They are learning that if they don’t have money they cannot spend it, and if they spend it they will not have it. They are setting goals and sticking to them, and are learning the importance of helping others, of giving back to a society/system/community that allows us to live a life of comparative luxury. My husband and I have ultimate veto authority over their purchases (just because they have the money for a thing doesn’t mean they can get it), but have rarely had to use it.

    We do not tie allowance to chores – in our family, being a member of the family means you do stuff around the house. The last thing I want is an attitude of “how much will you give me for it” when I ask/tell my kids to do something.

    Also, we don’t give them cash, we have a dry erase board on which we track “deposits” (weekly allowance) and “withdrawals” (money they spend).

    So far, it’s working for us. At some point, the allowance will increase, along with the list of things we expect them to pay for themselves. I have a feeling, also, that the frequency will decrease — they’ll get a certain amount per month rather than per week, for example.