How to handle allowances for kids
Should my kids get an allowance and how much?
March 16, 2022 5 min read
Kids and allowance: In many families, they go together like peanut butter and jelly. But is giving kids an allowance a smart way to teach them about spending and saving? What is a reasonable allowance for a high school student? A college student?
Here’s a list of tips to help you make the best decision for your child, your family and your wallet.
Why should kids get an allowance?
Many parents view an allowance as a way to teach kids about money. That doesn’t mean that allowances work for every family, and there’s no one-size-fits-all approach. However, it can be a good way to start the conversation about money—a conversation that can continue until they leave the house and beyond.
According to the Consumer Financial Protection Bureau (CFPB), the conversation is more important than the money alone. Citing research, the agency says it's important to provide “guidance on saving and budgeting” along with the money.1
When should allowance start?
There’s no universally agreed-upon age to start giving your kids an allowance. The CFPB mentions children as young as 5 years old can learn about saving.1 But remember, the agency also says the most important part is making time to talk with your child about their plans for the money.2
How much allowance should a child get per week?
Settling on the right child allowance amount depends on your family’s finances and other factors. One popular place to start is with $1 per week for every year old they are.3 So if you start when your child is 6, he or she would get $6 a week, then $7 and so on.
This gets trickier when kids start needing money for gas and prom dresses. So what is a reasonable allowance for high school students?
On average, teenagers with allowances get the same weekly rate as younger kids—around a dollar for every year old they are—according to a recent survey.4 But as life gets more expensive, you could try to adjust kids’ allowances to what they actually spend, rather than just pay for it yourself.
For example, if your teenager is spending hundreds of dollars a month on gas, food, clothes and cell phone data, you might consider giving them that money up front and seeing if they can stick to a budget.
“Young adults learn financial skills more and benefit when they have opportunities to make their own financial decisions,” the CFPB says, adding that having you as a safety net can help them learn from experience—and mistakes.1
Should allowance be tied to chores?
There are differing opinions about whether to tie chores to allowances. It’s a worthy discussion to have with your family. If you do decide to connect chores to an allowance, as many parents do, consider an allowance chart for kids on the younger end of the spectrum—$1 for making the bed, $2 for vacuuming and so on. Visualizing what they’re earning may help them stay on track.
Cash is king…for a while
For many parents, cash is the easiest way to introduce younger children to money basics, because they can see, feel and easily count what they have and what they spend. As kids get older, it might make sense to open a teen checking account and savings account so they can see their money grow and understand the basics of saving.5
The CFPB says to “consider opening a savings account for your child as soon as they save more in their piggy bank than you feel comfortable letting them have easy access to.” For young children, the agency says it’s also worth explaining the basics but holding off on more complicated topics, such as interest rates.
Allowance for college students
Family finances and college expenses vary wildly, making it almost impossible to offer a reliable average monthly allowance for college students. But no matter how old your kids are, teaching them about money can pay big dividends. An allowance is a natural place to start, no matter when you start and how much you choose to pay.