Should Adults Give Themselves an Allowance? 3 Experts Weigh In

A happy young adult woman enjoys time at her home, talking on the phone in the kitchen while drinking a cup of coffee.
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If you’ve ever questioned whether an adult is too old to give themselves an allowance, you have permission to stop questioning right now. 

GOBankingRates spoke to several financial professionals who were unanimous in agreement every adult should be paying themselves a personal allowance. Here are the biggest benefits which come from setting aside an allowance to enjoy.

A Personal Allowance Is Beneficial for Budgeting

Bruce McClary is the senior vice president of membership and communications at the National Foundation for Credit Counseling. McClary, who has worked in the financial service sector since 1995, said giving yourself an allowance goes hand-in-hand with budgeting best practices. 

“Carving out room in your budget for a personal allowance supports your financial and emotional well-being,” said McClary. “While using your savings as a motivating reward system you are also reducing your reliance on credit when it comes time to use what you have saved.”

Those who plan to pay themselves a personal allowance should be able to create a plan which prioritizes their necessities and keeps debt under control. McClary uses the example of the popular 50/30/20 rule. In this rule, an allowance might be part of the 30% covering discretionary expenses like dining out and entertainment. 

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Remember, however, this is in reference to a portion of this category. Depending on how you prioritize allowance, McClary said five or 10% may be a reasonable benchmark. The 20% recommended for savings would relate to emergency funds and retirement. 

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It’s a Life Hack To Have an Adult Allowance

Yes, really. Erin Papworth, MPH, is a behavioral scientist, money coach and founder of Papworth said people who have trouble tracking their spending habits or staying on budget benefit from an adult allowance thanks to a phenomenon called mental accounting.

Mental accounting explains how we categorize financial information to make decisions and how our brains tend to treat different sources of money differently. This can lead to good and bad financial decision-making alike.

Papworth uses the example of someone with $100 in their checking account. The same person also has $100 in savings. They are usually more reluctant to spend money in their savings account because this money is earmarked for a specific goal such as retirement. The full picture of your spending, however, is not addressed because you might be more likely to spend all of the money in your checking account. This money is not earmarked like savings. As a result, it may be viewed as disposable income you feel you can use without consequence. The only problem is you may need the money in your checking account to cover expenses you haven’t accounted for yet. 

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This is where an allowance steps in. Papworth said an allowance from your checking account allows you to increase the mental accounting of your money by earmarking a portion of your checking. 

In this example , you keep $100 in your checking account but only give yourself an allowance of $20. This means you increase your savings rate and your financial resilience.

“The key to making this work is to know how your brain is wired and ensure your mental accounting is helping you reach your financial goals,” said Papworth.

How To Give Yourself an Allowance

Ready to give yourself an allowance? Rivka Schreiber, CFP and founder at Flexible Finances, walks us through the process of how to do it.

  • Decide in advance how much you want to spend and what you plan on spending the money for.
  • Visit the bank and take the money out in cash.
  • Spend your allowance over a designated time frame, like the weekend.

What if you want to give yourself an allowance via credit or debit card? Schreiber recommends using actual cash. The bills will remind you how much money things cost. You will also be more likely to notice when cash starts to dwindle. This acts as a reminder of exactly how much you have left to spend, whereas you can lose track of credit card charges.

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“Adults should absolutely give themselves an allowance for certain things, specifically the fun weekend spending we can control,” said Schreiber. 

“Uncontrollable expenses like unexpected car repairs, soaring grocery prices and insurance rate hikes are out of our hands, but we can always spend more mindfully on the things which relax us and bring us joy.”

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About the Author

Heather Taylor is a senior finance writer for GOBankingRates. She is also the head writer and brand mascot enthusiast for PopIcon, Advertising Week’s blog dedicated to brand mascots. She has been published on HelloGiggles, Business Insider, The Story Exchange, Brit + Co, Thrive Global, and more media outlets. 

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