What’s the Right Age to Start an Allowance?

Written by dad - 14 Comments

I’ve written in the past about the allowance system that we use with our kids. In short, we give them $0.50 per week for each year of age. Thus, Son #1 (who just turned ten) now gets $5/week, Son #2 (currently seven) gets $3.50/week, and Son #3 (currently five) gets $2.50/week. These funds and then subdivided into charity (10%), savings (30%), and spending (60%). The kids get to pick their own charity (with some help from us), their savings go into a subaccount at ING Direct, and their spending money is theirs to do with as they please (within reason, of course).

This system has worked very well, and our kids have learned some great lessons. They’ve learned the value of a dollar, how to save for big ticket items, how to splurge without going broke, and they’ve even learned the value of matching funds. Best of all, they’ve also stopped pestering us for stuff when we’re at the store. If they can’t afford it, they can’t have it, and they understand that.

Now that our youngest is about to turn three, it’s nearly time to get him in on the action. As I’ve noted in the past, we’ve found that our kids are pretty interested in money — or at least buying things 😉 — by the time they turn three. Just as importantly, they’re also patient enough to site alongside you while you count out their money and hand it over to them. I’m not sure if all kids are that way, but I see no reason to change things up in our case. If anything, Son #4 is far more precocious than his older brothers, and I’m sure he’ll love the freedom to make some buying decisions of his own.

Published on November 14th, 2007 - 14 Comments
Filed under: Money
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Comments (scroll down to add your own):

  1. We haven’t done allowances with our kids yet. We’re still caught in the dilemma of giving them money without having earned it. I believe that money earned should be tied to chores or some required activities around the house.

    Do you require your kids to do chores? Age appropriate of course.

    Comment by Mindy — Nov 14th 2007 @ 3:31 pm
  2. I don’t actually like the idea of tying allowance to chores for the simple reason that we expect our kids to pick up after themselves, bus their dishes, and do other age-appropriate things because they are a part of our family, not because they are being paid to do it.

    If they go over and above the call of duty, then we pay them a little something extra — like when our ten year old spent the better part of an afternoon crawling around under the house helping me improve our vapor barrier.

    But like I said above, we expect our kids to help out around the house (in an age-appropriate way) whether or not they’re being paid for it. The allowance is a teaching tool.

    Comment by dad — Nov 14th 2007 @ 5:24 pm
  3. I don’t want to sound like I’m spamming on behalf of Dave Ramsey, but we’ve bought his “Financial Peace Jr” kit and love the principles behind it.

    Like you say, it’s important that kids do some things to help around the house because they are a part of the family and some things are responsibilities, not paying jobs.

    Another important principle is that their weekly cash flow is a commission, not an allowance. Allowance implies you’ve earned it by breathing, commission is earned.

    The kit comes with a Commission Worksheet that can be put on the fridge so the kiddo can mark the paying jobs he did (his timecard if you will) and then every Saturday we pay them based on the work they did. Our younger and older boys have different tasks on their list and they’ll get more jobs available as they get older (so they will get more cash as they get older).

    Comment by Daniel Koster — Nov 14th 2007 @ 7:24 pm
  4. We recently started our kids on allowance, but significantly less. I had heard in the past of $1 per year of age, but that just seemed to much to me. Then we heard of $1 per grade year, starting with pre-k being $.50. So my 5 year old is getting $1.00 and my preschooler is getting $.50 per week. Same set up though as far as percentages. How do you handle the ING Direct distributions? Do you do it all online or do they get the money themselves?


    Comment by Ben — Nov 15th 2007 @ 5:01 am
  5. Ben: We distribute the money to them in person, and then we periodically clear out their “savings” and put it in ING. Basically, they give me the money and I do an online transfer from our regular checking account to their ING subaccounts. I also give them an opportunity to take extra money out of spending and put it in savings (with a match from mom and dad) to reinforce the idea of saving extra to get ahead. This also gives us an opportunity to login and look at their balance, see how much interest they’ve earned, etc.

    As for spending and charity, those funds just build up locally until they either get spent (for spending) or the end of the year rolls around, at which point the kids choose their charities, give me the money, and then we (usually) make an online donation.

    Comment by dad — Nov 15th 2007 @ 9:10 am
  6. I like your system – might borrow it, too. We have our son on a “star” system: he earns stars. If he gets x amount of them, we purchase a book for him that he’s craving (currently the Star Wars Pop-Up book). It’s an indirect way to learn about earning power & money, and we might switch to something more direct as he gets older.

    Comment by Rob at Kintropy — Nov 18th 2007 @ 7:23 am
  7. That’s an awesome system. But I think I have to go with a dollar per year, because it’s a bit expensive here in New York. I love how you have savings and charity built in (and matching fund too?).

    I wonder if anyone of your kids add extra money to the savings or charity bucket.

    Comment by Pinyo — Nov 18th 2007 @ 6:47 pm
  8. Pinyo: Yeah, they add extra money all the time. For example, if they have $18 in spending, they’ll often round down to $15, throw the extra $3 in the bank and then get a bonus $3 in matching funds from me.

    Comment by dad — Nov 18th 2007 @ 6:49 pm
  9. There’s an argument in my head that forcing (even in a nice way) savings and donations, isn’t really the same as teaching them to choose to do those things for themselves.

    What do you think / how do you teach this?

    Or are you hoping that if you make it become habitual, it’ll just follow on as they’re older more or less by default?

    Comment by plonkee — Nov 20th 2007 @ 7:44 am
  10. Two things: We’re setting the example that it’s extremely important (and thus not optional, even later in life), and we’re also teaching them to save extra by offering matching funds on additional savings. It’s worked surprisingly well, in that they were reticent to do extra at first but have since come around and regularly save more than required.

    Another little trick is that when we go out to eat at certain restaurants, we offer the kids a choice of a soft drink or a dollar. In most cases, they’ll take the dollar, but if it’s *really* important to them to have a treat to go with their meal, they’ll sometimes opt for a bit of luxury (as we all should at times).

    Comment by dad — Nov 20th 2007 @ 8:17 am
  11. Great system.

    We intend to implement this allowance system this year with 2 of our younger children, aged 13 and 12. The youngest, 7, will have to watch and we hope that she, herself, will ask to be put on the system next year.

    We are want to include the keeping of accounts weekly on how they spend their allowance.

    Comment by fathersez — Nov 23rd 2007 @ 3:20 am
  12. I started a similar system a couple of years ago. My kids are 12 & 14 and get $15 a week. Out of that $15 they are responsible for paying for their own school lunches or they can opt to pack a lunch and save the difference. We have also set “base” amounts for shoes and clothing. If they want something that costs more than our “base” amounts they are responsible for the difference. They also use their allowances for movies, swimming, etc. with friends. There are no advances on their allowance and they have learned to keep a reserve for last minute invites to movies, skating, swimming, etc.

    We used to give them the old standard discretionary $5 a week for an allowance. And argue endlessly about expensive choices, etc.

    It’s amazing how frugal they have become when it’s their money. They frequently shop discount stores and search the web to find discounts/deals on shoes, games, etc.

    Comment by Ken — Nov 23rd 2007 @ 9:32 pm
  13. It’s a great allowance system but I too felt a little uneasy giving the children money when they didn’t earn it, at least not too soon. I started giving allowance when my girls are 8 years old. They got 2$ each week if they had good behaviors the week before. If they help out around the house, then I will reward them as I see fit. In my case, it works quite well. My girls learn how to save money for bigger things. Sometimes they even treat us to a meal here and there using their allowance. They understand the value of a dollar and how I and their father have to work very hard to support them.

    Every child is different and parents have different systems that work for them.

    Comment by Sherry Love — May 27th 2008 @ 10:32 am
  14. Thx for this. I have 4 boys as well. One is due in June. 🙂 I love that the plan isn’t too complex but seems to cover a lot of good lessons.

    I’ll check your more recent posts!

    Comment by Sarah E — Apr 20th 2010 @ 9:07 pm

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