Making Cents of Your Family’s Allowance Program

Making Cents of Your Family’s Allowance Program

Recently, parents have been banking lots of questions for me about allowances. One question I often hear is whether a child should get an allowance.  Another is whether part of an allowance should go toward something charitable such as the Big Change Roundup fundraising effort, currently ongoing for our own Vermont Children’s Hospital. Thus, this week, let me try to raise everyone’s rate of interest in the topic of allowances.

An allowance is a great way to teach children fiscal responsibility and money management. Most kids in this country do get an allowance, usually beginning at age 7 or 8 (when kids begin to understand the price of different things). Studies suggest that those who receive an allowance tend to spend and save more wisely.

Regarding how much to give, you should really establish the rate based on what you and your family can afford. Money management experts suggest 50 cents to $1 per week for every year of age, but no more than $10 until your child has at least entered adolescence.

The big controversy with allowances is whether allowances should be tied to chores or good grades. Some experts recommend using allowances for these purposes to incentivize these behaviors. However, others do not, saying that these are family responsibilities and expectations, and therefore should not be tied to a monetary reward. Instead, you can reward chores and grades with non-monetary recognition, such as a special family outing or even a simple compliment, which can mean far more in the long run than a financial bonus.

Whether you tie allowances to chores or choose not to, here are a few other tips:

  • Be consistent with the rules for your children before you begin an allowance program in your family.
  • Set a day to give an allowance (consistency is key to budgeting).
  • Agree upon the amount, and how much they need to set aside weekly for savings or a charity of their choice—such as our Big Change Roundup.
  • Let your children decide how they are going to spend their money. Be patient and don’t interfere with how the money is spent. They will make mistakes, but that is part of the learning process.

Hopefully, tips like this will make dollars and “cents” to you and your child when it comes to discussing allowances.

Lewis First, M.D., is chief of Pediatrics at Vermont Children's Hospital at Fletcher Allen Health Care and chair of the Department of Pediatrics at the University of Vermont College of Medicine. You can also catch "First with Kids" weekly on WOKO 98.9FM and WPTZ Channel 5, or visit the First with Kids video archives at www.FletcherAllen.org/firstwithkids.