American parents are shelling out an average of $780 a year for each child’s allowance. Think that seems a bit steep? Here are a few more allowance statistics from the American Institute of Certified Public Accounts that will shed some light on how your household rules stack up to the rest.
- 61% of parents pay an allowance to their kids
- 54% started giving allowance when their child was 8 years old
- 48% of parents with kids in school pay their children for good grades
- 89% of parents expect their children to work at least one hour a week
Those are the cold hard stats, but we wanted to dig a bit deeper. We chatted with folks who we assumed would be experts on allowance: parents who also happen to be finance professionals. You might be reassured to find that teaching children financial responsibility is a struggle even for those who focus on money during their day job. Here are three lessons that finance expert parents have learned when it comes to kids and allowance.
On Keeping Chores & Allowance Separate
“An error that I made was in connecting the allowance to household chores,” says Julia Chung, CFP. “While my son is very hard-working and completely understands the correlation between work and money, he unfortunately became less interested in participating in household chores once he picked up a job. I had to do some back-pedaling to disconnect money from the responsibilities that come with being a member of a family and a household.”
Ann Morgan James, Author of How to Raise a Millionaire
Ann Morgan, author of How To Raise A Millionaire, concurs. “On its face, allowance is a great tool, but we need to use it properly. Household responsibilities are just that: responsibilities. They are not – and should not be – jobs for which you are paid. I do not get paid to cook dinner or do the dishes, and I do not expect to pay my kid to do his share around the house. It is critical to assign tasks around the house to our kids; things they can do successfully like set the table, clear the table, fold and put away laundry, or bring in the mail. Make helping around the house part of their responsibilities as a family member.”
The Plastic Approach
“I’m a CPA and my wife is a CFP,” says parent Andrew Schwartz. “Even so, I think together we’ve done a lousy job teaching our two kids – Jonathan (age 14) and Lizzie (age 13) – much about personal finances. We have also done little to help them learning anything about exercising fiscal discipline.” Schwartz notes that over the years, they’ve toyed with monthly allowances, but lacked consistency. Recently though, he and his wife came up with a plan to add structure.
“We gave each child a Pass Card issued by American Express. We loaded each card with $100, and then will reload the card on the 10th of each month with their $25 allowance. In theory, when either kid spends all the money on the card, they are out of money until they next receive the $25 on the 10th of the month. We need to use this opportunity to remind [our children] that if they want to spend more than the $25 per month, they can always babysit, shovel snow or rake leaves for neighbors.”
For more insight on raising financially responsible children, stay tuned for the rest of our families and money series.