My oldest son, Story, turns 5 this month (I can barely write this out, as I’m in denial), and he’s starting to understand the concept of money more and more. My husband and I have been toying with the idea of when to start giving him an allowance and getting him some practice with money.
I recently played golf with a man who has three boys slightly older than mine, and he shared some really great wisdom with me that I can’t stop thinking about and want to share with all of you. In addition, I’ll share some of my ideas of how I’m going to teach Story and Henley about money and some things I’ve seen done with the hundreds of families I’ve worked with.
When to Start Giving an Allowance?
Every kid is going to be different, but I’m planning on starting to give Story an allowance at age 5. We talk about money a lot, and he’s starting to show interest in buying things himself, so for our family, it feels like the right age. The time to give an allowance is when they start showing some interest in money and also show some responsibility in being a member of the family with chores, housework, etc. Or, when you want them to start sharing some responsibility in household duties.
I Don’t Want to Give My Kids an Allowance Just for Living
OK, I hear this argument a ton. You don’t want to give your kid an allowance just for being a part of the family or doing chores that they are expected to do anyway. Fine, I get it. But also, we NEED to teach our kids about managing money early. How else can you compensate them on a regular basis and get them practicing young and early? Maybe there is another way that works for your family, but I personally am a big believer in allowances. As a child I had a weekly allowance and I learned a ton about saving, spending and managing money. Yes, I had chores and responsibilities that go along with it.
What Do I Give Them Allowance For?
Some families give a weekly allowance no matter what tasks the kids do or how the week went. Other families I know give allowance based on each household chore they do. This is really up to you as a family. Remember, one of the reasons to give them an allowance isn’t just to compensate them for what they do, but to give them practice handling money and understanding the cost of things.
How Much Do They Get?
The gentleman I golfed with shared that his kids get $0.50 a week for each year old they are. Five-year-old Story will get $2.50 per week. Ten-year-old Story will get $5 a week. After doing some more research, I’ve learned that a typical allowance is $0.50 to $1 per year of the child. This may depend on your family and your area, there really isn’t one right answer.
How Do I Give Them an Allowance?
So, this is something new I’ve learned: Many families aren’t using cash anymore. Isn’t that wild! You still totally can use cash if you want, don’t let me stop you. The man I golfed with uses Greenlight (I’m not associated with them in anyway). Greenlight is an app to help pay your kids on a consistent basis to make it easier for you to manage. Acorns is also a popular app that some people use as well. My advice is find a way that is easy for you and that you can provide the allowance consistently.
Now … Teaching Them
OK, now is the part where you really need to guide and educate them. Talk to them about saving and spending. How much should they be saving on a consistent basis? How much can they allocate to spend? It is also completely OK for your child to save up and then spend all their savings on something. This is normal, as they are young and getting the satisfaction of saving up for a big purchase. Talk to them about prices at the store. Pull up your app and show them how much money they have in their account.
The important thing is to let them make mistakes or bad purchases while they are young, when the costs are much smaller. They will make some bad purchases—let them. Try to give them some control in their spending.
If charitable giving is important to you and your family, you can also have them allocate some of their allowance to gifting. This is up to you and your family.
At Bloom Wealth Advisors, we help people invest for the long term. But you can’t learn how to invest until you learn how to save. We want to help you and your family plan for the future, one learning experience at a time.
If you have any stories to share about giving your kid’s allowance, I would love to hear them!
Please reach out to me to share any tips you have for me and for all of our other families raising youngins.
If we can provide you, your kids, your grandkids, or anyone else you care about more support or guidance, reach out!
Warmly,
Alana Macy, CFP®, MBA, Partner, Wealth Advisor
Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors.This information is not intended to provide specific legal, tax or other professional advice.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
Third-party applications referenced in this article are provided solely as examples for educational purposes. Bloom Wealth Advisors, Carson Partners, and CWM, LLC are not affiliated with, sponsored by, or endorsed by Greenlight, Acorns, or any other third-party application mentioned. We do not receive compensation for these references, and the inclusion of any app should not be construed as a recommendation or endorsement.
