Are Allowances For Good for Kids?

If you have children, you’ve probably heard them ask (or beg) you for an allowance at least a few times. Allowances can be a great way to help your kids learn about financial responsibility, but there are also some drawbacks. Creating an allowance system may not be the right fit for every family, and if you’re trying to decide if it may be right for your kids, it’s beneficial to consider all factors.

Included below are some pros and cons of giving kids an allowance as well as some ways to decide if it’s right for your family.

Allowance Pros

Other than likely making your kids very happy, giving an allowance can teach children valuable lessons that they may not always be able to learn elsewhere. Here are a few of the positive outcomes of giving your kids money of their “own” to spend:

Financial Literacy

For many kids, it can be difficult to comprehend how much things cost until they are managing money of their own. Giving your children an allowance can be a practical way to teach them about the importance of responsible budgeting, saving, and spending. Having their own money and seeing their spending habits in real time can also teach kids about the difference between wants and needs. 

Independence

When kids have the opportunity to manage their own money, they often gain a sense of independence. This can be a helpful confidence booster and provide them with valuable decision-making skills that they can carry over into other parts of their lives. 

Understanding Consequences

It’s important to understand that your children may not always make the smartest financial decisions with their allowance, and that’s perfectly okay. When they recognize the consequences of their spending choices, they may learn to think harder about future purchases.

Allowance Cons

While allowances can certainly teach kids about financial literacy and responsibility, they may also result in drawbacks. It’s important to weigh and consider all of the possible results of allowances before offering them. 

Entitlement 

Without teaching your children about financial literacy, allowances can lead to them feeling entitled to money without truly understanding its value. If allowances are given unconditionally, kids may begin to assume that money is always available to them regardless of situation. Older children or young adults may especially be prone to this, so it’s important to talk with your child about why you’re offering an allowance and what it means. 

Pressure to Spend

Some kids may feel an unhealthy pressure to spend their allowance quickly, which may lead to poor financial habits down the road. Without guidance or support, they may not make thoughtful purchases. 

Discussions with Peers

Giving your child an allowance may lead to conversations at their school about money, which could potentially highlight financial disparities between peers. If they don’t receive the same amount as their friends, jealousy may result. It’s important to consider having these difficult conversations with your children before deciding to give an allowance.

How Do I Know If An Allowance Is The Right Choice For My Family?

Choosing to offer an allowance is a decision that should be made with many different factors in mind. Here are a few things to consider when choosing if it’s the right fit for your family. Keep in mind that these may look different for every family, and these aren’t the only factors to consider. 

Family Financial Goals

Will offering your children an allowance help your family reach their overall financial goals, or will it result in significant setbacks? While your child may want an allowance, it may not be the smart choice if it puts your family in an uncomfortable financial situation. 

Your Child’s Personality and Maturity Level

Every child will respond differently to the introduction of an allowance. It’s important to think about their response to potentially new and stressful situations. If they’re not mature enough to responsibly handle an allowance, you may want to revisit the idea in the future. Many families start their children on an allowance around age 5 or 6, but there is no hard guideline to follow.

Family Values

Every family has a unique approach to teaching their children about hard work and responsibility. Would you rather your kid learn about the value of money from an allowance, or would you rather wait for them to have their first job? Will chores be included as a requirement for the allowance, or will you give them their allowance unconditionally?

Ultimately, there’s no right or wrong answer about allowances. Whether or not to give an allowance is a personal decision that should be made after considering your family’s financial situation, values, and dynamics.

Types of Allowances

Once you’ve decided that an allowance is right for your family, the next step is deciding what type of allowance to give. You can choose to provide money weekly or monthly, as well as find ways to add responsibility. Here are a few different options for creating an allowance system.