All About Allowance

Ask any 10 parents of 1st graders about how they handle allowance, and their answers will probably fall into three distinct categories: those who don’t, those who do, and those who do and then don’t and then do again. We all know allowance is important—we’re teaching our kids how to think about and treat money. But that doesn’t make it easy. Here’s what financial experts say about getting allowance going for good.

Kids should start getting allowance when they are of school age and the list of “extras” they want explodes, explains Jean Chatzky, author of Money Rules. While some families are ready when kids turn 5, Chatzky says, most kids are actually prepared for allowance at about age 7. Chances are, they already have an awareness of money from watching you whip out a credit card or get cash magically from a machine. Now teach kids where that money comes from, how to manage it responsibly and the consequences of when it is all gone. There’s no need to explain everything right away; they will get it in time and with practice.

Before the money changes over to small, sticky hands, take time to consider the big picture. Think about what you’ll teach your children by giving them a weekly allowance and creating a mantra. Intentions like “I am showing my daughter how to earn, save and wisely spend money” will bring you back around if you get off track or if enforcing the system seems overwhelming. “Kids of school age and many adults have trouble grasping that money is a limited resource,” Chatzky says. “Make the choice to teach and show your children this.”

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Cool Mom Tech editors recommend using an allowance-management app to track funds, add and withdraw money and show kids how to keep money organized in a 3.0 world. Some apps offer accounts for each child, and many can be purchased for a few dollars. There are also many education and tracking resources available online, such as ThreeJars.com, Allowance Manager and even programs run by credit card companies and banks. Some are free, others have monthly subscription fees, and others require parents to purchase a packet. It’s also just fine to use a simple spreadsheet, chalkboard or laminated chore chart.

“Give regular allowance,” advises Chatzky, “and have them use it to pay for things you are no longer willing to pay for. As the amount of allowance grows, so does the list.” For 1st graders, parents may stop buying toys other than birthday gifts. But by 3rd grade, kids can be responsible for purchasing after-school snacks. This creates a long-term structure so that high schoolers will pay for social events and college students know they’ll be expected to fill up their own car with gas.

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“Never give enough allowance to cover the things the child wants to purchase,” Chatzky warns. “Children should have to work harder than their regular chores to earn more money. They should see that and learn, ‘If I do extra work, I can enjoy my money even more.’ And it should be worth it to do the extra work.” This simple step helps instill the importance of work ethic. For example, give 50 cents a week and create a long list of tasks worth a dime apiece as incentive to go above and beyond.

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Once you’ve been through all the steps, it’s time to print the chart, post the rules and gather a stash of cash for the kids. Give yourselves some time to get used to the system, and make it a habit. But if it doesn’t work after a few months, try a new tactic. Whatever you do, don’t give up. It will eventually pay off—perhaps in your child’s future superstar credit rating, maybe in the moment your kid donates his own money to a charity and hopefully by empowering your kids to feel good about earning.

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