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Tuesday, May 29, 2012

Allowances: Should We or Shouldn’t We? (Anshu Basnyat, LCPC)

     The great allowance debate is still unresolved in our home. I, with a psychology background, say it is unnecessary and my husband, with his business background, says it is a great way to teach kids about money management.  For me, it is not even about how much a child should get for allowance. Together, we can come up with an easy formula. However, should the allowance be linked with chores is another story. Some people give allowance without it being linked to chores, which seems like free money to me, but what do I know...I only have a psychology degree! Here are three reasons why I am opposed to giving an allowance to children.

     Argument one: I strongly believe that as a member of a family, everyone needs to do their share. This is about working as a team in a family.  Of course, parents need to keep in mind that chores have to be age-appropriate. It is appropriate for a 5 year old to make his own bed, set the table, feed the pet, etc. It is not okay for a 5 year old to be cooking, ironing, taking out the trash, etc.  There are certain chores that kids should be doing without getting paid.  

     Argument two: I strongly believe children want to do well intrinsically and feel empowered when they make valuable contributions to the family. Chores teach kids responsibility, life skills, good citizenship, etc. Paying them to do these chores not only devalues these life lessons, but also complicates matter. Now, the parent has added an extrinsic motivator. Are the kids doing the chores because they want to or because they just want to get paid? Do you withhold allowance if they misbehave in situations that are not chores-related? What kind of rules do you set about how to spend the money they have earned?  For example, is it ok to blow their money on a pair of shoes that cost $100? These are tricky things a parent has to be able to work around so we do not inadvertently send the "wrong" message. In other words, the parent has good intentions and is trying to teach their child the value of money, but only to have their child waste it on something that is not worthwhile. What kind of money lessons do the kids end up learning?  

     Argument three: I strongly believe that children can learn money management or financial literacy without getting allowances.  We have not implemented allowance with our 7 year old son, and probably will not in the future. My husband seems to be seeing things my way at this time (wink).  However, our son already learned some key money management skills such as understanding the difference between a “want” and a “need” and he has been practicing spend, save, and share (the 3S’s of money management).  Most recently, he seems to be understanding the meaning of an “interest” like in banking.  For example, I recently was low in cash and had to send some money to his school. Discovered this the morning of, so no time to run to the ATM. I told him I’ll have to take a small loan out of his piggy bank and to this he very casually replied “Ok, but you have to put back more money than you took out.” Surprised by this I said “What?!” and to this, he nonchalantly added “That’s my rule or you can go to B’s (little sister) piggy bank to get it.”  Now, can someone honestly tell me that this kid does not understand money management?

I would love to hear your thoughts on whether you feel giving an allowance is a good or bad idea.


  1. hmmm...I think allowances will creep into the conversation when the children are older (12+). I agree - starting too young and the incentives become too much of the main attraction. I didn't grow up with allowances, but believe it can be a vital tool for financial literacy and for parents to teach children about savings.

  2. @Unknown: You're right, the allowance conversation starts when kids are bit older, but some families start earlier than the tween years. It can be a good teaching tool when parents control for factors that may jeopardize the learning process such as giving allowances for things that are part of the normal development process like cleaning up their room or washing their own dishes. In my opinion, if they rake the Fall leaves or mow the lawn, then payment would be appropriate. However, this pay is more similar to a job rather than an allowance. I wonder if you feel kids can learn financial literacy from other avenues such as saved up birthday money or other gift where they learn to budget,save, and spend? Thanks for your wonderful feedback!

  3. From a Reader who emailed me: I completely agree with your view that children should NOT receive allowance for doing their chores. Children are residents in our homes so they should also contribute to the smooth running of the home - at a level of contribution that is age-appropriate. The best advice that I ever read when my children were young was "The entire time that our children spend with us is merely a preparation for the time when we won't be there." The daily chores may be a hassle sometimes but these responsibilities teach our children the skills that they will need in running their own households or in holding down a job. I can tell you from my perspective as a grandmother that my teenage daughters needed constant reminders to put their dirty dishes in the dishwasher. But those same daughters now tidy up my kitchen when they come for visits with their children.

    However, I strongly believe that children (even young elementary school students) should have an allowance because they need to learn about making choices about handling money. When I took my teacher training to become a Montessori preschool teacher, I learned about the importance of allowing children to make choices in areas where their selection will not have serious consequences, e.g. which outfit to wear today, what book to read at bedtime, etc. As they gain more experience with making choices, they learn about the consequences of their selections.

    The opportunity to make choices is one of the main differences between our traditional Asian cultures and American culture. In the traditional Asian cultures, parents and elders tell children and young people what to do. But here there are many, many opportunities to make choices and we want our children to learn to make wise choices. The small amount of money that is a child's allowance gives them the opportunity to learn about making choices regarding money without large negative consequences.

    I'll share with you my experience when my older daughter was 8 or 9 years old. At that time, the Bionic Woman was a popular TV program and the Bionic Woman doll was heavily advertised. Lisa had asked for the Bionic Woman doll but I refused because it was very similar to Barbie and she already had a couple Barbies. After she realized that I wasn't going to buy it for her, she announced that she would buy it for herself with her allowance. I objected but she reminded me that I had told her that she could spend her allowance as she wished. This was a difficult lesson for both of us. I had to keep my word while she saved for a couple of months until she had enough money to pay for the doll. She was so proud of herself that she had saved her money and she bought the doll for herself. She ran off to play. About 30 minutes later, she came to me and said, "They tell lies on TV." The Bionic Woman doll was never a popular toy and she languished on the fringes. Lisa never again asked for a toy that was advertised heavily on TV.

    There is a children's book about making choices with money, "Alexander Who Used to Be Rich Last Sunday" by Judith Viorst.

  4. I don't think allowance should be based on chores. I never had an "allowance" at home but we all had jobs we rotated through and when we wanted to go ice skating or needed something reasonable my parents gave us what we needed. My children (age 7) are learning about their money through saving birthday money, etc.

  5. @C: Thank you for sharing your thoughts. I agree that you can use birthday monies and the like to teach money management without dealing with the complications that come along with allowances. Also, you make a good point about parents providing for their children within reason, which is important, but not always easy. One one hand, we might foster entitlement if we overindulge. On the other hand, we may get a complicated set of emotions/problems if our children feel neglected or unloved when parents do not adequately provide for them. A balancing act, if you will!