Feature Articles
Children and Allowances
Mary Anne B. Pettit, Center for Economic Education, Southern Illinois University-Edwardsville
Are you trying to decide if you should give your child an allowance? Wondering how much money is appropriate for your child? Should they be paid for chores? Following are some guidelines to consider when making this decision.
Have you ever noticed that people will eat differently in restaurants depending on if they are paying or not or that people take better care of things purchased with their own money? The fact is that consumers' behaviors change depending on who is paying, and children are no different than adults.
Giving an allowance to a child can provide many benefits besides an income. With some direction from adults, children can learn about saving, delayed gratification, spending motives, and money management.
First of all, if possible, do not tie a child's allowance to his or her required chores. Children should do chores as part of their responsibility to help with the family's needs, not because they are being paid for them.
So how much is a good amount to give to a child? Depending on the family income, one to four dollars per week for children ages 6 to 8 and four to eight dollars per week for children ages 9 to 12 would be a good beginning place. You may want to give the allowance in a variety of denominations (including both coins and bills). This may make it easier for young children to divide their allowance into various categories.
Sit down with your children and help them draw up a spending plan for their allowance. Explain to them what you will pay for (school supplies, clothes, etc.) and what they will need to use their allowance for (video games, going to the movies, etc.) Encourage them to save a certain percentage, such as 10%, of their allowance each time. Try opening a savings account at a local bank. Many banks will open savings accounts with little or no initial investment, and this will give your child the opportunity to understand how an account works. Provide a place for the child to keep the rest of his or her money (a special envelope, box, or a piggy bank).
Helping children learn to live with their spending decisions is another benefit of them having an allowance. Children need to learn to think through their purchasing decisions and then assess whether it was a good decision or not. Allowances can also provide a sense of ownership and responsibility.
Most importantly, discuss these issues with your children. Children will not automatically learn good saving and spending patterns by simply receiving an allowance. Have regular meetings with your children to discuss sound financial behaviors.
For additional information, see www.wisepockets.com a website developed by the Center for Entrepreneurship and Economic Education at the University of Missouri-St. Louis.
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Last update: Tuesday, May 05, 2009
