Paying an allowance can help your child learn good financial habits
Fact checked by Vikki VelasquezReviewed by Pamela Rodriguez
Paying kids an allowance can help them to learn good money habits early on. Seventy-nine percent of parents say they pay their child an allowance, according to T. Rowe Price’s 14th Annual Parents, Kids & Money Survey. If you have kids or plan to have them, knowing what other parents are doing can make it easier to come up with your own allowance strategy.
Key Takeaways
- 79% of U.S. parents pay their children an allowance.
- Most parents require their children to earn the allowance they receive.
- The mean allowance is $19.39 per week, while 35% of parents pay in the $11 to $20 range.
- Most parents who give their children an allowance do so to teach kids the value of working to earn money.
Average Kid’s Allowance
The amount that kids receive for an allowance can vary from family to family, but the mean weekly allowance amount is $19.39, according to the T. Rowe Price survey. In terms of what parents typically pay, here’s how the ranges break down:
- $5 or less per week—13%
- $6 to $10 per week—22%
- $11 to $20 per week—35%
- $21 to $50 per week—24%
- $51 per week—6%
Note
Kids may be ready to receive an allowance and start learning about money and saving when they begin kindergarten, which is usually age 5 or 6.
Reasons for Paying Kids an Allowance
The decision to pay kids an allowance is different for every family, though the majority of parents say it’s important for kids to understand the value of working for their money. Here are the most common reasons cited for paying kids an allowance:
- Want their kids to understand the importance of working to earn money—59%
- Want to teach their children how to manage money—35%
- Want their kids to stop asking them for money—3%
- Because their kids’ friends receive one—2%
- Other reasons—1%
Among parents who pay their kids an allowance, 64% said they required their kids to work for it. Just 16% said they didn’t expect their kids to earn their allowance.
If you don’t yet have an emergency fund in place for your family, it may be better to prioritize building one first before paying kids an allowance.
How to Set an Allowance for Kids
A commonly used rule of thumb for paying an allowance is to pay children $1 to $2 per week for each year of their age. Following this rule, a 10-year-old would receive $10 to $20 per week, while a 16-year-old would get $16 to $32 per week.
Another option is to pay kids per completed chore each week, assuming they’re required to earn their allowance. Parents can agree on payment for chores such as mowing the lawn, washing the car, washing the windows, washing dishes, vacuuming, helping with laundry, taking care of pets, emptying the dishwasher, and tidying up bedrooms.
Parents can also use a goals-based approach for determining where to set an allowance. Say, for example, that your child wants to save $400 to buy a gaming system. They want to earn that amount of money over the next six months. You can help them break down their goal to put into perspective how much they need to earn.
- Per month—$67
- Per week (assuming that they’re saving over 26 weeks)—$15
- Per day—a little over $2
Seeing the numbers can help kids decide whether their goal is achievable and figure out what they need to do to reach it. Learning how to set goals this way is a skill they can use when managing their finances as adults.
Consider opening a savings account for younger children and setting up your teenager with a prepaid debit card to help them manage their allowance.
Benefits of Paying Kids an Allowance
One of the main benefits of paying kids an allowance is that it can help them to gain firsthand experience with making and managing money. Eighty percent of kids say it’s important for them to be able to discuss earning money with their parents. And 97% of teens say that financial literacy is important.
Paying kids an allowance can help them develop their financial skills and enable them to make smarter decisions about money as adults. It can also encourage financial independence, rather than relying on their parents for money. Kids can learn how to budget and the importance of savings when they have money of their own to manage.
Consider the numbers. The personal savings rate in the United States was 3.8% as of January 2024. Thirty-seven percent of Americans say they couldn’t cover a $400 emergency in cash. Those statistics highlight why it’s so important for kids to get into a savings habit early on.
What Is a Good Weekly Allowance for a Child?
A good weekly allowance for a child can be $1 to $2 for each year of their age. The most important thing to keep in mind when paying kids a weekly allowance is what’s affordable, based on your budget, and what they’re required to do to earn it.
How Much Should a 12-Year-Old Get for an Allowance?
If you’re using the $1 to $2 per-year-of-age rule, then a 12-year-old should get a weekly allowance of $12 to $24. This range is consistent with the average weekly allowance that parents pay, which is $19.39. You may adjust this figure up or down, depending on the number of chores that your child is required to do to earn their allowance.
Should Kids Get Paid for Chores?
Whether it makes sense to pay kids for chores or not can depend on how you view those contributions and whether your kids receive an allowance for things other than helping out around the house. Using a paid chore system can teach kids responsibility and the value of earning money from doing work. However, some parents may view chores as a communal effort among all members of the household.
How Do I Reward My Kids for Doing Chores?
Paying kids an allowance is a popular way to reward kids for completing their chores. If you would rather not pay your kids an allowance simply for doing chores, you can reward them with other things, including screen time, a fun activity, or treating them to their favorite dinner or snacks.
The Bottom Line
The decision of whether or not to pay your children an allowance is a personal one, and there are different reasons for doing so. If you choose to pay one, it’s helpful to offer your kids some guidance on how to use it. That includes discussing the value of setting aside part of their earnings in savings before spending any of it. You might also consider teaching them the value of giving some of their money away to charity. The more often you talk about money with kids, the more knowledge you can equip them with when the time comes for them to manage their finances on their own.
Read the original article on Investopedia.