Paying kids an allowance can help them to learn good money habits early on. Seventy-five percent of parents say they pay their child an allowance, according to T. Rowe Price’s 13th Annual Parents, Kids and Money Survey.1 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
- Seventy-five percent of parents pay their children an allowance.
- The majority of parents require their children to earn the allowance they receive.
- The mean allowance amount is $19.30 per week, while 35% of parents pay in the $11 to $20 range.
- The majority of parents who give their children an allowance do so in order to teach kids the value of working to earn money.
Average Kid’s Allowance
The amount kids receive for an allowance can vary from family to family, but the mean weekly allowance amount is $19.30. In terms of what parents typically pay, here’s how the ranges break down:
- $5 or less per week—14%
- $6 to $10 per week—22%
- $11 to $20 per week—35%
- $21 to $50 per week—22%
- $51 per week—7%1
Tip: Kids may be ready to receive an allowance and start learning about money when they begin kindergarten, which is usually age 5 or 6.2
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%3
Among parents who pay kids an allowance, 59% said they required their kids to work for it. Just 16% said they didn’t expect their kids to earn their allowance.1
Important: If you don’t have an emergency fund in place for your family yet, 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. According to a Rooster Money report, the average amounts for the five top-paid chores are:
- Mowing the lawn—$7.49
- Raking leaves—$4.48
- Washing the car—$3.81
- Gardening—$3.07
- Washing windows—$1.944
Other options for paid chores might include 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 their goal down to put into perspective how much they need to earn.
- Per month— $67
- Per week (assuming they’re saving over a period of 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.
Tip: Consider opening a savings account for younger children and setting your teenager up 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 earn their own money and discuss earning an income with their parents.5 And 97% of teens say that financial literacy is important.6
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 U.S. was 7.9% as of January 2022.7 Thirty percent of Americans say they couldn’t cover a $400 emergency in cash.8 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 parents pay, which is $19.30.1
You may adjust this figure up or down, depending on the number of chores 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’d rather not pay 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.
This article was originally published by Investopedia on February 7, 2022, and written by Rebecca Lake. https://www.investopedia.com/guide-allowances-and-kids-5217591#:~:text=The%20majority%20of%20parents%20require,of%20working%20to%20earn%20money.
1. T. Rowe Price. “13th Annual Parents, Kids and Money Survey,” Page 42. Accessed Feb. 4, 2022.
2. Wiley Online Library. “A Developmental Perspective on Children’s Economic Agency.” Accessed Feb. 4, 2022.
3. T. Rowe Price. “13th Annual Parents, Kids and Money Survey,” Page 43. Accessed Feb. 4, 2022.
4. Rooster Money. “Kids’ Allowance Report 2021.” Accessed Feb. 4, 2022.
5. T. Rowe Price. “13th Annual Parents, Kids and Money Survey.” Page 46. Accessed Feb. 4, 2022.
6. Step. “97% of Teens Say Financial Literacy Is Important.” Accessed Feb. 4, 2022.
7. Federal Reserve Bank of St. Louis. “Personal Savings Rate.” Accessed Feb. 4, 2022.
8. Federal Reserve System. “Report on the Economic Well-Being of U.S. Households in 2020 – May 2021.” Accessed Feb. 4, 2022.
Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.