Experts: Is Allowance a Good Way To Teach Your Kids About Money?

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For the oldest Americans who grew up during the Depression, the concept of receiving an allowance would have been completely alien when they were children. Parents put their kids to work and the payment was food and a place to sleep. If money was changing hands, in fact, it usually went the other way, with parents confiscating the meager wages that their children earned working outside jobs. 

It’s easy to be nostalgic for that kind of childhood experience as being good for building character. But most experts today agree that parents can use a system of allowance to make their households run smoother while also teaching their children to manage their money responsibly.

Money Education Is Still Pretty Much Homeschooled — Start Young

While it’s not the Depression by any means, today’s students still mostly graduate from high school without having received even a basic primer on how credit works, how interest accumulates, how much of their income to spend on rent and how to manage money in general. If they don’t learn at home, they’ll learn as they go as young adults — and banks will be ready and waiting to cash in on their mistakes. 

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“Giving kids an allowance is a great opportunity to teach them the value of money and how to budget,” said Morgan Battista, a parenting expert, blogger and founder of momuprising.com. “Instead of suddenly needing to be responsible with money when they become adults, an allowance lets them practice with how to save, spend and even share their money. How many of us adults still struggle with this and wish we would have been better prepared for the demands of adult life?”

The Great Chore Debate

For parents who do believe in giving allowances, there are generally two schools of thought: allowance as a regular handout given without condition, or allowance given as payment for doing chores.  

“I believe that there are consequences for how you give your children an allowance,” said Grace Poole, parenting expert and founder of Parenting Under Pressure. “For example, if you give kids a regular allowance without asking for anything in return, there is a high likelihood that they will grow up with a warped relationship with money. They may feel a sense of entitlement toward it and never fully understand the value of working for what they earn. On the other hand, if you give kids an allowance based on whether or not they complete their chores, and/or the level of difficulty of the chores, etc., there is a high likelihood that they will grow up with a healthy relationship with money. Their understanding of money will be based on how they achieved it, not just what they were able to receive in exchange for the money.”

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Lorie Anderson, a parenting blogger at Mominformed, doesn’t necessarily agree. 

“Unlike some parents, we give allowances without any expectation of household chores,” she said. “We believe that household chores teach good habits and life skills, and while we do pay for certain tasks, like yard work, for example, the bulk of the household work-sharing comes without allowance.”

If You Give Cash to a Kid, Who Decides How It’s Spent?

There are also two schools of thought when it comes to controlling what’s inside the piggy bank. Is allowance money the child’s to spend how they want within reason, or is it simply an educational tool that the parent continues to control once it’s in the kid’s possession? 

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“While an allowance is generally beneficial, it’s important to monitor your kids’ spending and to make sure that they are handling their money responsibly,” said Ksenia Yudina, CFA, founder and CEO of parent/child financial app UNest. “The point of an allowance is to teach them valuable money lessons and you don’t want them to pick up bad habits, which can be hard to break.” 

Here, too, Anderson goes against the current and puts the power in the child’s hands. 

“We also don’t restrict how allowances are used,” she said. “We believe it helps them make good, responsible decisions about spending, saving and giving — with our advice, of course.”

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