As a parent, you have a few decisions to make about how you teach your child about money. An often-overlooked decision is whether to give your child an allowance. An allowance is a sum of money you give your child on a regular basis.
Some families choose to provide the allowance every week without conditions, while others set up an associated chore system for children to earn their allowance.
You can frame an allowance as a decision-making or money saving tool. When your child is using his or her own money, he or she learns how to spend wisely.
There is no right or wrong answer when it comes to giving your child an allowance. However, there are advantages and disadvantages to consider. Evaluating the pros and cons can help you decide whether an allowance is right for your child.
Pros to Giving Your Child an Allowance
There are many benefits to giving your child an allowance. An allowance teaches your children about finances and the responsibility associated with buying and saving for purchases.
A study done in 2017 out of Champlain College graded all 50 states on the financial readiness of high school students. Only five out of 50 states received an “A.” The more you do to enhance your children’s financial knowledge, especially at a young age, the better off they are as an adult.
It Teaches Positive Money Habits
As a parent, you are in control of the allowance structure for your child and how you teach your child about money. This factor allows you to set the rules your child must follow in order to obtain the regular allowance.
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Giving your child an allowance enables you to teach the fundamentals of money and coach your child through responsible spending. This helps your child develop positive money habits for the future.
You can offer an allowance for any number of reasons. However, most allowances are given for the completion of chores or good grades. You can also give your child an allowance at a set amount without tying it to any chores or obligations.
An Allowance Builds Work Ethic
If you choose to tie the allowance to a household chore, your child can learn that the harder he or she works, the more money he or she earns. It is helpful to make an itemized list of chores for your child to track his or her progress in completing them.
With this strategy, your child learns to associate completing chores with reward when you issue his or her first “paycheck.” This can teach them to associate chores with reward and satisfaction.
An allowance lets your child earn the non-essential items he or she wants, such as video games and toys. This allows your child to feel a sense of pride when paying for the item with his or her hard-earned money.
An allowance can help your child practice his or her basic math skills, as well. If you have a younger child, it is recommended you practice this interaction at home or supervise in action.
It Teaches Values and Priorities
Another popular way to incentivize your child with allowance is to connect the reward with good grades. This can encourage your child to prioritize studying more and putting effort into homework. The emphasis on grades today can affect the perception of school on your child in the future.
When a child is successful in school it can open other doors like scholarships or grants. These lessons may even help your child get into a better school as an adult. Finally, it can also teach your child how to prioritize certain expenses and make responsible decisions for the future.
Cons to Giving Your Child an Allowance
Though giving your child an allowance has many benefits, there are several disadvantages to consider. An allowance has the ability to undermine the importance of contributing to the family.
Your child may develop a sense of entitlement surrounding money, depending on the frequency of the allowance. It also leaves room for the belief that any chores or household duties require a reward.
Your child must learn every member of the family pulls weight. Identifying the difference between a weekly chore list and sharing in family duties is important, but younger children may struggle with this distinction if they only ever associate doing chores with earning an allowance.
Lowers Motivation for Altruistic Action
If you are tying allowance to chores, your child may not be as motivated to complete the chore list when he or she has enough money saved and does not need the extra money. Additionally, it may be challenging to keep to the set allowance schedule when your child is on a school break.
Unfortunately, paying your child for doing chores shows your child working for money is not always fun. Additionally, children may balk at helping out unless there is a monetary award attached to the task. Simply helping out to be nice may take a back seat to making a buck.
At Some Point the Allowance Must End
Having a scheduled allowance can prevent your teen from looking for other work outside of home, once he or she is the appropriate age. Once you and your partner feel comfortable and decide to end or lessen the allowance amount, you can approach your teen about applying for a part-time job. If you have offered an allowance for many years, your child may balk and become resentful.
Determining Allowance Parameters Takes Time
If you decide to tie an allowance to your child getting good grades, there are some cons to be mindful of. It is important to set a precedent for your child on what he or she needs to achieve in order to receive the allowance. Is it passing a test? Is it studying for a certain amount of time each night?
Whatever you decide to calculate the allowance on, it must be achievable. It is possible to set the bar in one spot, and then decide to raise it if you are noticing it is too achievable for your child.
As a parent, you have the deciding vote on how to manage the bar. Instead of raising the bar when your child’s grades improve, you can add other expenses for your child to manage and be responsible for, with or without an added allowance.
Related Article: How to Raise Financially Careful Children
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