Allowance for Kids

Paying allowance to your kids is a bit of a mystery if you’ve never done it before. While the basics of an allowance are straightforward, there are a lot of nuances to how you pay it, when you pay it, and what it’s tied to. If you’re trying to figure out the details, we’ll help you cover some of them below.

Paying an allowance may put some strain on your budget. We’ll discuss how much you should pay for an allowance below, but make sure that you’re meeting all of your needs before dolling out an allowance to your child - while teaching your child money management is important through an allowance, even more important is practicing money management yourself.

At what age should I pay an allowance?

Every child is different in terms of their desire to use money, and their ability to understand how to use it. Generally, you shouldn’t wait until they are older than 9 years old. If they haven’t already started asking for money from you before this age, then you should begin to introduce the concept of an allowance to them by this time. If they’re already older than that, that’s fine as well - go ahead and get started with them.

However, your child may start asking about money at a much earlier age than that. There’s no reason that you can’t start to provide an allowance to your child once they’re able to keep money out of their mouth, count the money, and understand how to save money to buy things. This likely won’t happen until your child is 4 to 5 years old, but once again every child is different in their growth.

In other words, age is not the most important factor in determining when to start paying an allowance. Rather it’s the child’s ability to understand how money works, and to be old enough to keep the money out of their mouth. Going to the emergency room because your child swallowed a coin is not fun, believe us.

Should I tie pay to tasks or age?

There are two primary strategies for paying an allowance - pay for the work completed, or simply set an amount that you pay each week/month to the child. Often, people will combine both of these strategies for how they want to pay their kids around the home.

Paying your child for completing certain tasks is great, but it can also be a very slippery slope. If you’re choosing to go this route, we’d recommend that you’re only paying out for larger tasks that you don’t normally expect your child to complete around the home. For example, you may pay your child to mow the lawn as that is a task that normally an adult would complete around the home.

However, paying your child to clean their room is probably not a good idea. If you come into a situation where you’re no longer able to pay an allowance for whatever reason, your child will now no longer feel like they should clean their room as they’re not getting paid for it. By tying an allowance to tasks, your child will now expect to be paid for those tasks.

In general, it’s a better idea to not tie your allowance to chores or tasks around the house. Chores are something that everyone in the household should be expected to complete regardless of whether they get paid. Kids should know that they’re expected to help around the house at all times.

Instead, you should determine an amount to pay your child based on how much you can pay, and how much they can be responsible with. Very often, people will tie this to the child’s age. As your child gets older, they’ll earn more as part of their allowance. This is the simplest way to know how much to pay your child.

How much should I pay for allowance?

As we mentioned before, make sure that whatever amount you choose to pay doesn’t put you in a financial bind. If you can’t pay for all of your own necessities, then you shouldn’t be paying any allowance at all. Allowance is a great tool for teaching children, but it should not put you further into debt.

Assuming that you're paying your children by age, it’s generally recommended that you pay your child  a dollar for each year. So an 8 year old earns $8 while a 10 year old earns $10. This gives a very natural way to give your child a raise each year without having to figure out when you would do it, and how much. Obviously, if you can’t pay them that much, then scale it for what you can pay ($.50 per year, or you start them at a lower amount that increases each year by $1).

In terms of pricing out one off tasks, you should determine how much the time is worth to you, and price accordingly. For example, if you were going to pay someone else to mow your lawn, and you were going to pay them $20 to do so, then you should pay your child a similar amount. However, if you wouldn’t pay someone that much, then figure out how much your own time is worth. That may be $10, that may be $5. Whatever it is, pay them fairly (and within your means).

Conclusion

Paying an allowance to your kids can be a bit confusing at times. Figure out how much you’ll be able to pay your kids, and make sure you teach your kids good money management skills.