The Allowance Debate

The Allowance Debate

The average allowance for children in the United States comes to about $30 per week. That’s a lot of spending money! Can offering an allowance help teach important financial lessons? Many parents believe so. Others, and even some experts, are more skeptical. Whether to offer a child an allowance is a personal choice and even parents in the same family may disagree. How can you tell if an allowance is a good fit for your family? Here are some factors to consider.

Why give an allowance?

  • It can teach kids about money management.

Giving children an allowance can be a great way to teach them about money management. Receiving a small amount of money regularly can help them learn to budget, save, and spend responsibly. Saving up for items they want can teach them organization and planning skills they will use throughout their lives.

  • It can help them learn the value of money.

By receiving a regular amount of money, children can begin to understand how much things cost. This may help them be more appreciative of their possessions and help them make informed decisions about their spending.

  • It can help them learn the relationship between work and pay.

Earning an allowance helps teach children about the relationship between work and pay. When children receive money as a gift, they may not understand the effort required to earn it. However, parents often expect children to do chores for their allowance. When they have earned money by doing chores they can learn that money is earned through work and that they must put in effort to receive it.

  • It makes them aware of what it means to have responsibility.

Whether they spend their allowance or save it, children will learn responsibility as they work with money. Particularly if they are earning money by doing chores, they will quickly see the relationship between their actions and the consequences.

  • It can be an incentive to get work done.

Children often resist doing chores, and having an allowance contingent upon their completion may help motivate some children.

Why not give an allowance?

  • It gives parents less control.

Some parents feel that having excess spending money might not be a good thing in and of itself. They feel that if their children have excess spending money, they may buy things the parents are not yet ready for them to have, such as make-up or video games they deem inappropriate.

  • It can undermine the importance of contributing to the family.

  • When children are paid for doing chores, it can send the message that they are only expected to help out around the house if they are being compensated for it.

However, contributing to the family is an important responsibility and one that should be undertaken without the expectation of payment.

  • Motivation to do chores may be absent if children do not lack money.

  • As children grow, they will have other sources of income such as working or babysitting.

This may decrease their willingness to do chores if they are only doing the chores in order to be paid.

Giving money on an “as-needed” basis encourages parent/child interaction.

According to Dr. Lewis Mandell, professor of finance and managerial economics and dean emeritus, State University of New York at Buffalo, in an interview published in USA Today, talking about money with your child can be just as helpful to their financial literacy as actually giving an allowance. According to a 2001 survey of high school seniors, children who were given a weekly allowance with no strings attached actually did worse on a test of financial literacy than those who did not receive any allowance at all. This could be because more frequent conversations about money are necessary when children must interact with their parents to receive money.

Giving a child an allowance can be a great way to teach them about money management and responsibility. However, it is important to consider the potential downsides. Ultimately, the decision to give an allowance should be based on the individual needs and values of each family.


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