Is An Allowance for Kids A Good Idea?

“Mommy, I want that,” the little boy in front of me at the grocery store checkout line said while gently tugging on the hem of his mom’s shirt. He was gesturing to a small action figure – probably today’s equivalent of G.I. Joe – in one of the nearby displays. His mother was doing a good job of ignoring her son, but he was undeterred. “MOM-MY,” he started again, “I want that toy!”

His mother responded with stony silence. The little boy held his breath, turning bright red. I knew what was coming next: I’ve seen the documentaries about volcanoes on The Discovery Channel – I know when something’s about to blow its top.

“MOMMY, give me that toy RIGHT NOW!”

He finally had her attention – and everyone else’s in the store, for that matter. What he didn’t have, however, was the toy… or anything with which to buy it.

Our Kids Are Under-Educated About Money

Parents are expected to devote a copious amount of time to educating their children. They’re expected to teach them their ABCs and 123s; they’re expected to drill their addition, subtraction, and multiplication skills; they’re expected to show their children how to read. But many parents fall short – horribly short – when it comes to teaching their children about money: how to save it and how to spend it. After all, if we as a society were doing a better job of teaching the next generation about money, would we have:

Walk through any college campus during orientation week and you’ll see credit card companies plying their wares on unsuspecting – and uneducated – freshmen, many of whom learned calculus in high school, but failed to learn how to take care of their finances.

Is An Allowance The Answer?

When I was a kid, it seemed like all of my friends and I got a weekly allowance. Some of my friends had to do household chores in order to get their coveted cash. Others – and these were the kids of whom I was severely jealous – got their money no matter what.

On the surface, giving kids an allowance seems like an excellent opportunity to teach them the ins and outs of money. If that little boy in the grocery store had been given an allowance, he’d have been able to save up enough money to spend on that action figure he so desperately wanted. This would have avoided his meltdown, his mother’s embarrassment, and all the stares they got from their fellow shoppers. Problem solved.

Not so fast…

The Camp Against Allowances for Kids

The childhood allowance may seem like a no brainer, but some critics argue it really doesn’t force kids to use their brains in the first place.

Lewis Mandell, a SUNY Buffalo economics professor, is one of them. He tells Time Magazine’s Moneyland website that allowances for kids teaches them one of two lessons, neither of them good:

  1. By giving children an allowance tied to their chores, parents are essentially paying their children to do things they already should be doing. Does Dad get paid when he takes out the trash? Does Mom get paid for folding the laundry? No, and neither should Junior.
  2. By giving children an allowance without any strings attached, parents are teaching their children that money grows on trees – or, at least liberally appears at will from Mom or Dad’s wallet. This teaches children to be spoiled and entitled, without drawing parallels between hard work and making a living.

Mandell’s argument, at least on the surface, makes sense. He’s looking for kids who are contributing members of the family, who help around the house without financial implications, but out of their loyalty to the family unit. But withholding an allowance isn’t going to teach your kids anything about money either. What’s a helpless parent to do?

What Do You Think?

Since I don’t have kids yet, I haven’t had to cross this bridge. I have, however, seen my friends try to navigate this sticky situation with their children. One of them, espousing Mandell’s principles, has completely eschewed the idea of an allowance, much to the chagrin of his 9-year-old daughter. Another has gone in the exact opposite direction, doling out money whenever his 12-year-old son asks for just about anything.

What do you think is the best way to teach kids about money – not just to distinguish the differences between dimes and nickels, pennies and quarters – but to teach them about actual dollars and sense?

I want to know what you’re doing to educate your kids about personal finance. Leave a comment to tell me what’s working – and what isn’t – when it comes to teaching your kids the value of a dollar. I’ll be using your comments in a follow up post to explore the good, the bad, and the ugly of kids and money.

8 Responses to Is An Allowance for Kids A Good Idea?

  1. krantcents says:

    My children had allowances and the learned a lot about money. We required them to save 50% of their money. They also learned about work for money. They did not receive their allowance if they did not perform their chores.

  2. Emily says:

    My def. of allowance is money given for nothing in return. IMO krantcents did not give the kids an allowance, but paid them for work.

    When DS begins to understand money, DH and I plan to do the same thing, except that certain chores he will be required to do w/o pay, b/c he’s part of the household. We will pay for “above and beyond” work, and also encourage entrepreneurial ideas.

  3. Ira says:

    I think this guy Mandell is off base. Parents pay for lots of things for kids – food, clothing, schooling, toys/games, etc. Now, parents can either say to kids that they will pay for everything, but then the parents make all the decisions. Or, the parents can carve out some things (like “extras”) that they say to the kids: “we won’t pay for that, but if you want it, you can save up your allowance, and then buy it with your own money.” I simply don’t see any downside of that, and it is a way of teaching about savings, and also the value of things (if the kids have to spend their own money, rather than just getting it all).

    We did give our kids allowance. Two of them, as soon as they graduated college, were immediately off our payroll, and paid for all their own expenses (except for staying on our Family Plan for phones – well, that’s a different story and one that everyone my age – late 50’s – is very familiar with). Our third son is still in college, but works during the summer and pays for all of his leisure activities (and spring break trips) from the money he earns. The only controversy was when he wanted his parents to pay for a fake i.d. before he turned 21…

    Ira

  4. Noah says:

    I agree with Ira. I don’t see any downsides to giving a child an allowance.

    I understand the idea that you don’t want to reward your child with money for every little thing they do right, but I do believe that when a child exhibits hard work and discipline, allowing them to have some independence with money is a good thing.

    If you choose not give an allowance to your children, there are only 2 options:

    1. Never buy anything for them except during Christmas and birthdays
    2. Buy them things when they want them

    Both of those are worse, in my opinion, than giving an allowance tied to chores. As a child, I never skipped an entire week of chores, unless I was on a summer vacation. My sisters, on the other hand, routinely skipped chores and were not paid. It was their choice and in return I usually had money when I wanted to buy something whereas they did not.

    I acknowledge that a child might start to only associate money with accomplishing something and only want to do something if money is tied to it, but isn’t that how we as adults think? While I do like accomplishing goals, I don’t go to work for free. I do it to receive money so I can support my family.

  5. David says:

    My parents never gave me money because they couldn’t really afford to give me anything. They had a mortgage and paid for me and my brothers to study in private school. We all ended up saving our birthday money from our grandparents and having fun doing non-money costing activities. Nowadays people are too attached to activities that cost money. Taking kids hiking or making them participate in more outdoorsy activities are cheaper and define more character. Just my 2 cents.

    • Noah says:

      @David, I absolutely agree that too much money is wasted on meaningless activities when doing simple things like hiking can be not only healthy, but enrich relationships.

      I’m curious, do you think not receiving an allowance has made you better or worse off in your adult life?

  6. Jerry says:

    Well, you don’t have to tie the allowance to chores. The allowance is just that – an allowance. Kids need to do chores that lead to a smooth-running household. They also need to learn about money. Learning early is insurance they won’t make stupid mistakes as adults.

  7. alirobertson says:

    The bottom line is, letting your child to handle money enough at an early age teaches responsibility.

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