Do you give your child an allowance?
It’s a highly personal decision, and one that most people have strong opinions on. On the one hand, you don’t want your children to grow up thinking chores are something they’ll be rewarded for their whole life; they’re something you have to do to pitch in and maintain your family’s residence.
On the other hand, you don’t want a lack of access to money to leave your child clueless about how to handle cash later in life.
As it turns out, both of these arguments are correct, though that doesn’t make the decision to give or not give an allowance any easier.
Discuss and Practice
According to T. Rowe Price’s 2017 Parents, Kids & Money Survey, children who have regular money discussions with their parents have more financial confidence. And those who have regular, consistent practice managing their own cash—through a medium such as an allowance—lie to their parents less about money, talk to their parents more about money and are more likely to have a savings account.
These two factors appear to be interdependent. The more often your child talks to you about money, the more likely they are to be good with money. And the more practice they have managing their own money—even if they make mistakes—the more willing they will be to open up those conversations with you.
An allowance facilitates experiential financial lessons while your child is in the home, and inspires conversations that allow you to discuss mistakes and solutions before those mistakes are made out in the real world. Here's how a family used an allowance to develop good habits.
Don’t Tie an Allowance to Chores
When you tie an allowance to chores, your child starts to expect money when they compliantly complete their tasks. That’s not such a bad thing, but if your child refuses to do their chores and you take the money away, you’re practicing “negative punishment” as it’s known in developmental and behavioral psychology.
Negative punishment can be problematic for a few reasons. First of all, when your child grows up, no one is going to be handing them $60/month to do the dishes. When the incentive of cash is removed completely, your child may lack that inner motivation to take out the trash or do the laundry. Negative punishment tends to only work as long as the incentive exists in order to be taken away.
Another problem is that the incentive you try to take away may start to lose its luster. Maybe you’ve got a saver on your hands (great news!) and they feel like they’ve met their financial goals. They don’t really want an extra $10 this week if it means an hour in front of the sink or ninety minutes deep cleaning the bathroom. It’s just not worth it to them anymore, and your path of recourse has failed.
Should your child decide that they’d rather be broke and not do chores, you hit another snag: without money, your child isn’t getting regular practice managing it. Now not only is your noncompliant kid not helping around the house, but they’re also missing out on the experience necessary to build money skills in their youth.
Should I give my child an allowance?
Ultimately, it’s your decision. If you do give your child an allowance, it’s going to be most effective if you don’t tie it to chores. If you don’t give your child an allowance, it is still possible to instill good money habits; you just have to make sure you’re allowing them to manage the money they do receive for birthdays and holidays themselves, and that you’re making a concerted effort to discuss financial matters with them as they’re going to be less likely to bring up personal economics themselves.