A Blog from Your Kaiser Permanente Pediatricians in Northern California

Dollars and Sense: Starting an Allowance

Dollars and Sense: Starting an Allowance

My father was a banker. After work every day, he emptied the change in his pockets into a piggy bank – for me! It was the largest piggy bank you’ve ever seen – in the shape of the cartoon character Goofy.

I loved playing with and sorting the change that accumulated inside Goofy. My dad must’ve known there’s a lot to be gained by letting your kids play with your change, such as teaching them about:

  • Shapes and sizes, values, or addition and subtraction.
  • Spending wisely, saving well, and even earning interest, as your they get older. Goofy sure grew in value over the years!

Beyond just letting them play with your change, you may be wondering about other ways to educate your kids about money.

When should you give your child an allowance?

This is often the first question that comes up. The answer can be simple:

  • When you decide that your child needs money of their own, start giving an allowance.
  • When they bug you on a regular basis to buy them new toys or games, you can tell them to save their own money to buy them.

Saving up for a purchase big or small teaches them a lot. But to save, they have to earn, right?

What should an allowance be given for?

An allowance is recognition that your children have needs and wants beyond the basic necessities you give them. Even more importantly, an allowance helps children learn to manage money before they become young adults.

The usual wisdom advises parents not to make regular chores part of earning an allowance. Your child should do household chores simply because they ‘re a member of your family. You don’t want them to expect payment for normal household upkeep like picking up their room, clearing the dinner table, or feeding the pets. After all, no one pays you to wash, cook or vacuum.

You can offer to pay your child for jobs you need done that are separate from the routine chores. Perhaps you need the windows washed, car cleaned, or the garden weeded. You probably have a willing helper if you offer a small monetary bonus for their efforts.

How much allowance should they get?

This depends on your budget and beliefs.

  • Consider giving a certain amount per year of age.If you give 30 cents per year of age, your 8-year-old would get $2.40 a week, with a built-in raise on their 9th birthday to $2.70 a week. This means that to buy a $10 toy, they’ll have to save for about 5 weeks. This is a reasonable period for your child to wait and work to get something they want.
  • Keep in mind that they may want to spend money on something you don’t think they should buy. This is part of the learning experience. If they spend hard-saved cash on a junky toy that breaks, it will be a powerful lesson: They chose poorly, so next time they may be wiser.

How do I teach them to save?

Think about building into the amount of allowance enough for your child to put into savings or donate to charity. Suggest that they save at least 10 percent of their weekly income; open a savings account to help them learn the value of interest. Save the money in the bank for big purchases bought with your approval.

Can I teach how to contribute to charity?

  • Yes! You can keep a “charity jar” (or a Goofy bank) for change in the house. After a year of contributions from your child (and you), choose as a family where to donate the money. You might buy necessities for families in need, or buy the ingredients and bake pies together for a local shelter at Thanksgiving. You can also find a charity online.
  • Around my house, we have an additional rule that teaches both money management and manners: If you curse, you owe the charity jar your fine!

Should I talk about my own salary?

Although we don’t recommend tying chores to allowance, you can talk about how you earn your money. Explain that:

  • A big reason why you and/or your partner go to work is to earn money to support the family. This money is used to pay for housing, food, heat, clothing, and gas, and to save for emergencies and for the future.
  • Without a job, you couldn’t cover these basics, let alone the luxuries you enjoy. If you can, take your child to work with you occasionally so they can see you in action.

Young children are right: Playing with money is fun. But learning to spend and save it wisely is important too. Help your children learn now so they will be secure and comfortable as an adult.