How to give kids an allowance

Providing opportunities to earn an allowance is a great way to teach kids how to spend and save. A University of Cambridge study found that people form many of their financial habits by the time they’re seven years old. So, with the right parameters and meaningful conversations, an allowance can be an awesome teaching tool.

Here's what to consider if you’re trying to figure out the best way to help your kids earn an allowance.

When should you start giving kids an allowance?

Experts agree that kids ages three to five understand the difference between needs and wants, so that may be a good time to introduce an allowance system. This way, money management skills become a part of their lives very early on. The sooner they learn, the more likely it will stick with them as adults.

How much should you give kids for an allowance?

Depending on your child’s age, there are a few ways you can give children opportunities to earn an allowance. Additionally, the older they get, the more they can learn about financial responsibility.

• Ages 3-5: Starting out, you might pay your 3-year-old a quarter if they put away their toys away or 50 cents if they make their bed. Don’t worry about quality at this point. Just make a big deal about completing the job — and pay them immediately. It’s important for them to make the connection between working and getting paid.
• Ages 6-10: Give them more responsibility and independence to succeed or fail. Create a list of chores they need to complete throughout the week, like feeding the dog or taking out the trash. Assign a dollar amount for each task and at the end of the week, add up how much they earned based on the jobs they completed, and pay them that amount.
• Ages 11-18: Allowances don’t always have to be tied to physical labor. As your child gets older, consider other lessons you want them to learn, and tie their allowance to it as an incentive. They might earn money for A’s on their report card, or for keeping a specific amount in their savings account. All in all, it’s a fairly simple concept. If the child meets the predetermined requirements, they receive the agreed upon allowance. If they fail to meet the predetermined requirements, they don’t get the money.

Pro tip:Keep in mind that chores rewarded with money should be separate from family chores—those things your kids should do just because they’re part of the family.

Should you give kids cash for their allowance?

Even in a digital world, it’s a good idea to teach children about physical money. There’s an emotional connotation attached to watching your piggy bank fill up, or having to surrender money for a purchase. That lesson may be missed if they’re only using a family finance app like FamZoo. For children with smart phones, a chore or allowance app may be a fun tool in addition to handling physical money. Additionally, children with money in their pocket typically want to spend it, and quickly. As a parent, you’ll have a lot of teachable moments regarding impulse purchases and delayed gratification.

What to remember

Providing an allowance is more about teaching personal finance than it is giving kids money because they want it. Allow them to make mistakes and have honest conversations about spending and budgeting. Learning good money habits today will serve children well throughout adulthood.

More information

When that piggy bank starts to fill up, open a joint savings account with Citizens. A savings account allows your children a safe place to set aside money. As they get older, you could encourage them to contribute to a college savings account. For more information about our savings accounts, call 1-877-360-2472 or open a savings account online today.