AllowancesThere is a lot of debate over whether or not you should give a child an allowance. Learn about the different types and the pros and cons of doing so.

There is a lot of debate about whether or not you should give a child an allowance. You also need to make sure you can afford to give your child an allowance. If you can, and you want to try an allowance, it can be a great way to foster wise spending decisions.

But even after you've decided to go ahead, there are a lot of other considerations. For example, what kind of allowance should you give? How much? When should they receive it?

Types of Allowances

The first type of allowance is a Chore-Based Allowance (a grade based allowance fits in this type as well). With this allowance, you are paying your child to do their chores. It teaches the child to work for their money. They learn that to get money, they need to earn it, not just expect it.

However, some experts argue that children should do their chores because they are members of the house and not because they are getting paid for them.

Another type is a Needs-Based Allowance. A needs-based allowance is not based on chores, work done around the house, or grades. It is based on what your child can reasonably need for a week.

For example, if you regularly buy your child a candy or small item at the store each week, give them the money as an allowance instead. Then they have the opportunity to spend it or save it. You are giving them money that you would otherwise spend on them so they can do the spending themselves.

The final type of allowance is a Combination Allowance or a hybrid of the chore-based and needs-based. With this type of allowance, you provide an allowance based on needs, but allow them to earn more by doing chores that go above and beyond what they are expected to do.

No matter what type of allowance you go with, it is an important teaching tool. It teaches your child that money is finite. It give them the opportunity to use their own money to spend on items they want.

But you need to be firm with the amount. Once they run out of money, they need to learn that they do not get any more until their next allowance.

It’s important to let them make decisions even if they make mistakes. That’s how they will learn. Use these opportunities to talk to them about their decisions.

Pros and Cons of Allowances


  • Children learn to be responsible for their own money. If they lose it or spend foolishly, they have to deal with the consequences.
  • Children learn the value of money and appreciate it more. They know how and why to save money.
  • It is their money, so it is their choice.
  • Money is coming from their pockets, not yours. They know once their pocket is empty, they can’t spend any more.


  • Kids may not spend the money how you would like them to.
  • They may complain that they do not get enough of an allowance.
  • Kids might complain that it takes too long to save. If you can afford it, offer to chip in or match their savings if they’re trying to get something bigger.
  • They might lose their money.

How Much Allowance to Give

Once you've decided to give your child an allowance and the type of allowance, you'll then need to determine how much to give.

A rule of thumb is to give children enough of an allowance so they can squander it, but not so much that you’ll be upset when they do. Keep in mind: It’s better to not be able to go to the movies for a couple of weeks when they’re 16 than not being able to pay rent or a car payment when they’re 25.

For 6-8 year olds, the average allowance is about $4.80 a week, according to a Nickelodeon/Yankelovich Youth Monitor survey. That rises to $7 for kids 9-11 and $16.60 for 12- to 17 year olds.

Another idea is to give an allowance equal to half your child’s age. You can always give children the opportunity to supplement their income by doing odd jobs.

Keep in mind: Just having money doesn't teach children how to manage it. Whether your children work for allowances or receive them unconditionally, look for teaching moments when you pay up. That way either method can help kids learn to manage money.

Paying Them

You may want to pay your child in a manner that reflects your child's age.

For example, for young children, you'll want to give them their allowance in a form they can easily divide into parts (singles, coins, etc.)

For tweens and teens, you can give them larger bills as you expand their allowance money to include more responsibilities such as gas, insurance, cell phone bill, and as they take on other discretionary purchases such as video games, movie tickets, shopping excursions, etc.

 Financial Education