Managing an Allowance
Introducing a new world of financial responsibility
Getting an allowance is an exciting rite of passage. It provides a whole new world of responsibility and independence as your child learns basic money management skills, like budgeting and saving, which can help them throughout life. Here are some tips to help you decide how and how much to give:
- Give an allowance that's appropriate for your child's age. Many parents base the amount on the "going rate" in their community. Ask other parents how much they give their kids. Give within your own comfort zone and be consistent.
- Set clear expectations. Do you expect your child to pay for certain expenses? If so, which ones? Be sure to discuss these responsibilities thoroughly so there are no questions later.
- As your children age, change the allowance accordingly. For example, when they're younger, limit the payment time frame, keep the amount small, and begin to set expectations such as whether they need to earn their allowance and what expenses they're expected to pay. As your kids get older, say 14 to 18 years old, use the allowance to reflect the real world. Pay your children every two weeks, or even monthly. Have them create a budget. Increase the amount you give them, but also increase their responsibilities.
- Let them learn from mistakes. Children will be children, and that's OK. Expect yours to do some unexpected things with their money—and to make some unwise decisions.
- Support them, but don't rescue them. If your children make a financial error, don't rescue them with more money. Help them work through the situation and arrive at a solution.
Allow your kids to learn. Remember, the purpose of an allowance is to let young people learn how to manage money firsthand, through their own successes and failures.
The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.